Tue, Nov 06, 2012 - Page 14 News List

Manufacturing declines: HSBC

AFFECTED:According to an economist, the nation is still feeling the pressure from slow global trade, although manufacturing activity is not decreasing as quickly as before

By Crystal Hsu  /  Staff reporter

The nation’s manufacturing sector entered its fifth straight month of contraction last month, but the pace of decline eased to its slowest in four months, the HSBC purchasing managers’ index (PMI) for Taiwan showed.

The PMI rose to 47.8 points last month from 45.6 one month earlier, indicating that manufacturing activity recovered some momentum, but the overall condition left much to be desired, according to the latest PMI monthly data.

“Taiwan is still feeling the pressure from sluggish global trade, although manufacturing activity is not deteriorating as quickly as before,” HSBC economist for Greater China region Donna Kwok (郭浩庄) said in the report.

A PMI value above 50 indicates expansion, with any value lower than this threshold signalling contraction.

The new orders sub-index stood at 45.8 last month, up from 42.3 a month earlier, while the new export orders reading improved from 42.7 to 45.8, the report found.

“The slower pace of contraction in both indices is encouraging, but should only be taken as a tentative and not outright sign of stabilization,” Kwok said, adding that the drag came from foreign clients in the US, China and Europe.

Firms remained cautious about inventory build-up, with the index on stocks of finished goods at 47.6 as 14 percent of respondents recorded a drop in inventory, while 9 percent reported a rise, the report said.

Voluntary inventory adjustment rather than weaker market demand accounted for the downward trend, Kwok said.

Inventory depletion is positive as it will allow new orders to give a bigger boost to production and help lessen the chances of the nation descending back into a sharp destocking process, as seen in the 2008 global financial crisis, she said.

Input prices accelerated sharply last month, ending five months of sustained contraction and leaping to a 14-month high of 55.9 compared with 49.1 in September, the report said, which is attributed to higher raw material prices, specifically for copper and crude oil.

Output prices contracted for the seventh straight month with the sub-index moving to 48.7 from 46.6, as manufacturers shouldered the burden of higher costs to remain competitive in a tough business environment, the report said.

Employment conditions held steady last month from September, as nearly 93 percent of manufacturers reported no headcount change, therefore keeping the employment sub-index at the neutral 50 mark, the report said.

With output set to recover through the year-end and inflationary pressures back on the rise, HSBC expects the central bank to resume interest rate hikes in March next year, Kwok said, adding that the US quantitative easing measures set off capital inflows and growing inflationary pressures.

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