Domestic manufacturing activity contracted last month, as the local economy remained vulnerable to fluctuations in the global economy, a report by HSBC showed yesterday.
The bank’s purchasing managers’ index (PMI) for Taiwan showed that factory activity fell to 47.1 last month from 50.7 in April, dragged down by declines in new orders and manufacturing output.
A figure below 50 indicates a contraction. The reading for last month was the first time the index has fallen below 50 since November last year, HSBC said in a statement.
“Demand deteriorated on both a global and local basis in May, as orders contracted not only from China but also the US, Europe and at home,” HSBC Greater China economist Donna Kwok (郭浩庄) said in the statement.
HSBC’s purchasing managers’ index is a composite of 11 sub-indices — new orders, output, employment, suppliers’ delivery times and stocks of items purchased among them — that offers a snapshot of the nation’s manufacturing sector.
In a negative signal for the manufacturing sector in the coming months, new orders fell substantially last month, ending five straight months of increases, as orders at home and abroad shrank, HSBC said.
“Taiwan manufacturers’ descent into contraction mirrors what took place last summer, although client demand is deteriorating at a faster pace this time, both at home and abroad,” Kwok said.
The latest results also showed a slight decrease in employment last month because of the local economy’s lackluster growth.
The economy grew less than expected — 1.67 percent year-on-year — in the first quarter of the year, according to official data released last month.
The economy is forecast to rise 1.98 percent this quarter and 2.4 percent for the full year, the Directorate-General of Budget, Accounting and Statistics said on May 24.
Kwok said Taiwan could still be at risk of slipping into a technical recession this quarter, should GDP contract again on a sequential basis following a decline of 2.8 percent on a seasonally adjusted annualized rate (SAAR) last quarter.
“Taiwan’s re-emergence from economic contraction last quarter is looking increasingly challenging, although for now, job market conditions continue to hold relatively stable,” she said.
Taiwan’s official PMI data for last month is to be released today by the Chung-Hua Institution for Economic Research (中華經濟研究院). In April, the official gauge dropped to 56.8 from 62.4 in March, indicating a slowdown in manufacturing expansion.
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