The HSBC manufacturing purchasing managers’ index (PMI) for Taiwan stayed below 50 for the seventh consecutive month last month, but still rose to its highest level since June, suggesting signs of stabilization in the manufacturing sector, a report by the British banking group showed yesterday.
The PMI, a leading gauge of the manufacturing industry’s health, improved to 47.1 in December, up from 43.9 in November, on better than expected US demand, HSBC Asia analyst Donna Kwok (郭浩庄) said in the monthly report.
“The latest PMI supports continued optimism for a gradual, if tepid, recovery of US demand as we enter 2012,” Kwok said. “Half a year of inventory destocking means that a small boost for production could be just around the corner.”
A PMI value above 50 indicates expansion, while a smaller reading suggests a contraction.
New incoming business from local and foreign buyers remained weak, but the pace of contraction eased, with the new orders sub-index rising to 44.3 last month from 40 the previous month, while the new export orders sub-index climbed from 40 to 42.8, the report showed.
Demand from the US, rather than China, likely underpinned most of the improvement as evidenced by better economic data in the US as Chinese counterparts weakened, Kwok said.
The report also showed that the nation’s output sub-index remained in contraction territory last month, despite improving from a month earlier. It also showed manufacturing payroll figures rebounded into positive territory, although the size of the expansion was minimal.
The report said slowing demand continued to check input and output prices last month — a proxy frequently used to measure manufacturers’ profitability and ability to pass on input costs — as the related sub-indices stood at 47.5 and 48.4 last month respectively, suggesting benign inflationary pressure.
However, Kwok said strong demand for oil from emerging markets and potential supply disruptions in the Middle East were factors that would ensure the central bank remained wary of a rebound in imported inflationary pressure.
As a result, in the absence of any further deterioration in Europe’s sovereign debt crisis, the central bank was likely to keep the rediscount rate unchanged at 1.875 percent this year, she said.
“A rate cut of 12.5 basis points remains on the cards for Taiwan” this quarter, if the European debts crisis deteriorates, she said.