Taiwan’s manufacturing conditions improved last month, lifting the headline HSBC PMI value to its highest level in 18 months, thanks to a gradual, but faster rebound in demand in China, Europe and the US, HSBC Holdings PLC said in a report.
The British banking group’s Purchasing Managers’ Index (PMI) for Taiwan stood at 52 last month, up from a neutral 50 in August, as firms reported increases in new orders and export orders, pushing the index to its highest level since March last year, the report said.
A stronger reading was posted across all sub-indices with output, new orders and new export orders all back in expansionary territory last month, the report indicated.
“The stronger PMI reading confirms our view that its manufacturing sector has stabilized in the third quarter,” HSBC economist in Asia Ronald Man said in the report.
PMI aims to gauge the health of the manufacturing industry with a score below the 50-point mark indicating a contraction and values above the threshold suggesting expansion.
The broad-based improvement was particular encouraging,
especially in new orders and output, Man said.
Even so, the economist affirmed his view that the nation’s export-focused economy will continue to operate below its potential and the central bank will maintain its monetary policy for the rest of the year.
Improvements in other high-frequency data are also required for HSBC to have conviction that Taiwan’s recovery is fully underway, Man said.
Taiwan’s average PMI climbed to 50.2 during the June-to-last month period, from 49.1 in the second quarter, suggesting the manufacturing sector moved toward a stable recovery, boding well for GDP growth.
“We expect GDP to rise 2.9 percent last quarter, up from 2.5 percent three months earlier,” Man said.
Global downside risks remain with attention focused on the timing of when the US Federal Reserve will taper off its quantitative easing, the economist said.
Conditions in China are recovering at a modest pace with the HSBC PMI for China rising to a marginal 50.2 last month.
Both the input and output price sub-indices continued to advance for the fourth consecutive month, Man said, predicting inflationary pressures would pick up moderately this quarter.
At home, manufacturing employment last month grew at its fastest monthly pace since April 2011 and the resilient labor market would support private consumption, the economist said.
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