Manufacturing activity continued to shrink last month in response to weakening global trade flows, but the pace of contraction was not as rapid as it was in 2008 to 2009, a report by HSBC PLC showed yesterday.
Although the HSBC Taiwan purchasing managers’ index (PMI) improved slightly to 43.9 points last month from 43.7 in October, ending five months of consecutive falls, the headline index remained below 50 — an indication that manufacturing activity continued to contract last month.
A PMI reading of above 50 indicates an overall improvement in business conditions, while a lower PMI suggests deterioration.
“The impact of softening Western demand is becoming more evident as output contracted for the sixth straight month,” Donna Kwok (郭浩庄), economist for Greater China at HSBC Asia, said in the report.
However, employment still held up better than during the 2008 to 2009 global financial crisis, cushioning the final impact on domestic demand, she added.
Employment just missed the 50-neutral mark by 0.1 percentage points at 49.9 last month, compared with October’s 50, meaning the size of the contraction remained negligible, the report said.
Although the sub-indices for output, new orders and new export orders rose last month from a month earlier, the pace of the decline remained strong in a historical context, with orders received from both local and foreign buyers contracting, the report said.
Inventory accumulation continued to unwind, with the sub-indices for stock of finished goods and purchases declining further to 44 and 42.1 respectively last month, from 47.3 and 43.7 in October.
Deliveries appeared to have been mildly, but not critically, affected by flooding in Thailand last month, causing a slight increase in suppliers’ delivery times despite lower purchase volumes, it said. This sub-index fell to 47.4 from 48.9 a month earlier, according to data from the report.
Input and output price pressures eased further, with the former contracting at a faster pace to 47.6 last month compared with 48.4 a month ago, and the latter sliding to 47.6 from 47.5 during the same period. Both remained far below their long-run averages of 60.1 and 53.4 respectively.
Kwok said the intensifying global economic headwinds would undoubtedly lead to policymakers becoming more cautious, increasing the chances of interest rate cuts.
“The continued decline in inflationary pressures gives the central bank more room to maneuver,” she said.
The central bank is scheduled to hold its quarterly board meeting on Dec. 29. Kwok expected the bank to maintain its benchmark rate at 1.875 percent.