HSBC’s manufacturing purchasing managers’ index (PMI) for Taiwan fell to 50.5 last month, from 51.2 in April as demand from the US and emerging Asian markets partially offset the impact of weakening European demand, a report by the bank showed yesterday.
That was despite that Taiwan's manufacturing growth was still in decline last month from April.
The latest PMI reading, a bellwether for the state of the -manufacturing industry, raised concerns over the sustainability of the economic recovery with domestic consumption weak and job market conditions softening, while the local bourse has also shed value, HSBC Greater China economist Donna Kwok (郭浩庄) said.
“Taiwan’s manufacturing sector is still holding up, although the strong momentum seen in the first quarter is clearly starting to fade,” Kwok said.
The industry has been less active so far this quarter with PMI readings averaging 50.9, lower than 51.9 in the first quarter, with manufacturers clearly cautious about restocking, the economist added.
Monthly PMI figures help to shed light on the well-being of the manufacturing industry, with a value above 50 indicating expansion and anything below -suggesting contraction.
The sub-index on new orders eased to 51.5 last month, slowing from 51.8 in April, while the reading for new export orders accelerated from 50.4 to 50.7, the report showed.
“Consumers at home and in the US, China and South East Asia are throwing a lifeline to Taiwan’s manufacturers, enabling them to fend off falling demand in Europe,” Kwok said.
However, employment conditions have started to show signs of weakening, with the employment sub-index posting a contraction for the first time in six months at 49.7 last month, from 50.6 in April, the report found.
The trend does not bode well for the job market, which has so far provided critical support for domestic consumption in the face of a global economic downturn, Kwok said, adding that the recent decline in the value of shares was another drag on performance.
Although the unemployment rate dropped to a new three-and-a-half-year-low at 4.1 percent in April, it is expected show an increase from last month as new college graduates start to join the labor force.
The price of inputs fell sharply for the first time in four months, standing at 48.5 last month from 54.9 in April, thanks to easing raw material price growth in fuel and metals, the report said.
Slowing market conditions allowed manufacturers to better cope with the competitive environment last month in which output prices fell for the second consecutive month to 48.2 last month, from 48.4 in April, the report showed.