Fri, Sep 02, 2011 - Page 11 News List

Manufacturing index falls to 45.2

By Amy Su  /  Staff Reporter

Taiwan’s purchasing managers index (PMI) slipped to an eight-month low of 45.2 last month, from 46.1 in July, as orders from both local and foreign buyers contracted simultaneously, a report by HSBC PLC said yesterday.

It is the third straight month the PMI has been below the 50 (“neutral”) mark. A PMI above 50 indicates an overall improvement in business conditions, while a lower PMI suggests deterioration.

The index, a bellwether of the manufacturing sector for the next three months, suggests the outlook is increasingly challenging.

“Softening demand at home and abroad is increasingly weighing on growth, given the island’s less diversified, heavily electronics-reliant exports structure,” Donna Kwok (郭浩庄), economist for Greater China at HSBC Asia, said in the report.

The new orders sub-index, an indicator of incoming new business from local and foreign buyers, fell to 41.7 last month, from 43 the previous month, the report said.

The new export orders sub--index fell to 39.8 from 44.7 during the same period, the first time it has fallen below 40 since January 2009, while still well above the trough of 14.9 in December 2008, the report said.

However, slowing external demand has yet to hinder Taiwan’s job market recovery, Kwok said, adding that last month’s employment sub-index rose above 50 for the first time in three months, to 50.5 from 49.6 a month ago.

The latest downturn in the PMI have been more reflective of the situation in the US than of Chinese demand, Kwok said, indicating that local manufacturers might benefit from Chinese demand amid the preferential trade tariff channels built by the Economic Cooperation Framework Agreement.

The inventory of finished goods sub-index rose to 48.7 last month, from 47.4 in July, the report said.

Meanwhile, due to higher raw material costs, the sub-index of input prices — surging to 56 from 48.7 a month earlier — rose above 50 for the first time in three months, the report said.

The output prices sub-index fell for the second straight month to register 49.5 last month, compared with 49.8 in July, it said.

“With the inflation picture still relatively under control, the central bank still retains some room to maneuver away from its gradual monetary normalization,” Kwok said.

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