The HSBC Taiwan purchasing managers’ index (PMI) wobbled to 44.5 last month from 45.2 in August, staying below the neutral mark for the fourth straight month as companies at home and abroad cut orders amid a dimming economic outlook, a report said yesterday.
The latest PMI reading reflected heightening downside risks in the West and suggested the correction would persist, albeit at a milder pace, the report said.
“Incoming new business flows from local and foreign buyers declined faster in September than in August,” said Donna Kwok (郭浩庄), an economist at HSBC Asia. “We expect the decline to continue until Western demand and China’s manufacturing activity pick up.”
A PMI value above 50 indicates expansion, while a smaller reading suggests contraction. Last month’s score dropped to a nine-month low, boding ill for industrial output and exports in upcoming months.
The overall new orders sub-index cooled to 41 last month, from 41.7 a month earlier, while new export orders inched up to 41.1 from 39.8, as firms continued to exercise caution amid market volatility, the report said.
Slower new business inflows, in turn, dragged the output sub-index down further to 41.3, from 42.3, the report said.
The readings remained high above the values recorded during the global financial crisis of 2008 and 2009, Kwok said, implying that Taiwan’s export-reliant economy was faring better this time as the world staggers closer toward a double-dip recession.
Job market recovery has yet to be dislodged by the ongoing technology correction cycle, with the employment sub-index improving to 51.1 last month, from 50.4 in August, the report said.
Kwok said the labor market displayed a higher degree of resilience than in 2008 even though the improvement was marginal.
Inflationary pressures eased further amid softening demand as the input sub-index decelerated to 53.7 last month, from 56 one month earlier, while the output price reading slowed to 49.3 from 49.5, the report said.
“With inflationary pressures under control, we remain comfortable in our expectations for the central bank to keep the benchmark discount rate unchanged at 1.875 percent until mid-2012,” Kwok said.
However, consumers and governments in the US and Europe are set to deleverage as the sovereignty crisis unfolds, weakening demand for consumer electronics, which contributed much to Taiwan’s GDP growth in the first half, the Hong Kong-based economist said.
China, the nation’s largest export destination, will help mitigate some, but not all of the negative impact, she said.
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