Wed, Nov 02, 2011 - Page 12 News List

PMI declines to 43.7 on faltering global economy

NOT ALL GLOOMY:The employment reading suggests the nation is not heading toward a recession, as although the economy is slowing, it appears resilient

By Crystal Hsu  /  Staff Reporter

The HSBC Taiwan purchasing managers’ index (PMI) declined for the fifth consecutive month to 43.7 last month from 44.5 in September, as the faltering global economy dampened the nation’s business flows, a report said yesterday.

“The impact of softening external demand became more evident last month” as the US and Europe continued to deleverage, prompting local and foreign buyers to exercise caution, HSBC Asia economist Donna Kwok (郭浩庄) said in the report.

The index, used to gauge the health of the manufacturing industry, is important given Taiwan’s heavy dependence on exports.

A PMI value above 50 indicates expansion, while a smaller reading suggests a contraction.

Last month’s score suggested the country would see an extended soft patch in industrial output and exports.

The new orders sub-index weakened from 41 in September to 39.5 last month, the lowest level since January 2009, as business activity at home and abroad slowed further, the report said.

Meanwhile, the new export orders reading shrank to 39.9 last month from 41.1 in September, helping drive the output measure down to 39.2, also a new low since January 2009, the report said.

Although cautious about the economic outlook, Kwok said the nation should fare better than during the global financial crisis of 2008 as China’s manufacturing activity shows signs of stabilizing.

Taiwan’s job market has remained healthy so far, with the employment sub-index staying in the neutral zone with a reading of 50 last month from 51.1 in September, the report said.

The employment reading further suggests that the nation is not heading toward a recession as in 2009, when the jobless rate climbed for 14 months, Kwok said, adding that the headcount reduction began a quarter ahead of the economic downturn.

Both the input and output price indices retreated further, reading 48.4 and 47.5 respectively, as a result of easing inflationary pressure, the report said.

With the domestic economy slowing, but resilient, the central bank is likely to keep the benchmark discount rate steady at 1.875 percent, Kwok said.

“Taiwan’s ability to fend off the impact of softening Western demand should strengthen, lessening the need for a policy rate cut,” she said.

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