The HSBC manufacturing purchasing managers’ index (PMI) for Taiwan expanded for the second straight month last month, rising to a 10-month high of 51.5, from 50.6 in December, lifted by stronger demand from local and foreign buyers, a report by the British banking group said yesterday.
“Taiwan’s manufacturing sector continued its delicate recovery into this year,” though local demand lent greater support, HSBC Greater China economist Donna Kwok (郭浩庄) said in the report.
The PMI is a bellwether of the manufacturing industry’s health, with a score above 50 suggesting expansion and values below the threshold indicating contraction.
Total new orders rose by 2 points to 52.4 last month, from 50.3, while new export orders eased from 51.4 to 51.3 but managed to stay in expansion mode, the report said.
Employment levels expanded for the fourth straight month to 50.4, compared with 51.3 previously, as firms increased payroll slightly to meet rising production demands, Kwok said.
Output accelerated to a 10-month high of 53.3 from 50.4, strong enough to keep headcount steady in the near term, the economist said.
HSBC expects Taiwan’s output to show stronger improvement going forward on the back of Asian rather than Western demand.
The estimate, coupled with less policy uncertainty over stock market performance, should set a floor beneath employment levels to secure steady private consumption growth, Kwok said.
The government is therefore likely to refrain from any significant increase in fiscal spending this year, she forecast.
On the price front, the input index picked up by 2.4 points to 54.2 from 51.8, while output prices contracted at a slower pace to 48.9 from 46.7, the report found.
Rising raw material prices in global markets pushed up input prices, but firms hesitated to pass on higher costs to stimulate customer demand, Kwok said.
Inflation will initially remain benign this year, but may pose a greater concern as China’s recovery gains more momentum, she said.
“The central bank may start to normalize policy rates as early as the end of March, especially if US fiscal issues are resolved,” Kwok said.
The central bank has kept benchmark interest rates unchanged at 1.875 percent since June 2011 to support economic growth, but it has introduced selective credit controls to help rein in housing price hikes in Greater Taipei as well as in the luxury home segment.