The nation’s purchasing managers index (PMI) contracted for a second month and slipped to a seven-month low of 46.1 last month, from 49.9 in June, as global demand for electronics cooled further, a report by HSBC PLC indicated yesterday.
A PMI score above 50 indicates an improvement in business conditions, while a lower value suggests deterioration.
The latest PMI reading, a bellwether of the nation’s manufacturing landscape in the next three months, suggests short-term challenges for Taiwan’s export-reliant economy, despite it being high season for the high-tech industry.
“Taiwan’s outlook is looking increasingly challenging, with softening demand at home and abroad increasingly weighing on growth,” HSBC Asia economist Donna Kwok (郭浩庄) said in the report, adding that Japan’s supply chain disruptions could no longer be solely blamed for the weakness, as in previous months.
PMI components retreated across the board last month — in sharp contrast to South Korea, the nation’s main trade rival — given Taiwan’s less diversified, heavily electronics-reliant export structure, she said.
The new orders sub-index, an indicator of incoming new business flows from local and foreign buyers, fell to 43.0 last month, from 49.8 one month earlier, the report said.
The new export orders sub--index fell to 44.7 from 50.2 during the same period, while slowing business flows depressed the output sub-index, which sank to 42.6 last month from 48.4 in June, the report said.
“Global electronics trade flows have turned increasingly choppy of late, but shipments should stabilize next quarter,” Kwok said, attributing her confidence to a drop in stocks of finished goods and in purchasing activity — with their sub-indexes dipping to 47.4 and 44.5 last month from 51.6 and 52.4 in June respectively.
“The figures suggest manufacturers are starting to run down the stock of excess inventory they built up in the aftermath of Japan’s earthquake, meaning production activity should stabilize soon,” she said.
Cooling demand by suppliers and consumers pushed down output and input prices as the former sub-index eased to 49.8 last month, from 50.4 in June, while the latter stayed nearly unchanged at 48.7 from 48.2, the report said.
Similarly, the employment sub-index saw little change at 49.4 last month, from 49.6 a month earlier, with 93 percent of survey respondents saying there was little change in headcount numbers, the report said.
Despite the discouraging data, Taiwan’s economy remains in good shape, supported by strong regional demand for non-tech goods, Kwok said.
“That should soon start to lend a helping hand to electronics providers,” she said.