Taiwan’s manufacturing conditions are improving this quarter, with HSBC’s purchasing managers’ index (PMI) rising to its highest level last month since March last year on the back of stronger new orders, the British banking group said in a report yesterday.
HSBC Taiwan’s PMI rose to 53.4 last month, up from 53 in October, and was at its highest point in 20 months, the report said.
Demand from domestic and external fronts rose over last month, which fed into higher output and prompted companies to raise employment, the report said.
“With inventories dropping at their fastest rate in a year and official new export orders trending up over the past two months, manufacturing activity is set to improve through the year end,” HSBC economist Ronald Man (文略韜) said in the report.
HSBC expects Taiwan’s GDP growth to reach 2.4 percent this year and 3.6 percent next year, higher than the government’s forecasts of 1.74 percent for this year and 2.59 percent for next year.
Man said that the latest PMI reading supported HSBC’s view that Taiwan’s export-dependent economy remains on track for a recovery, though uncertain global growth poses downside risks, adding that the weak export figures in the past two months suggest that the recovery is not running at full speed.
Input price pressures rose due to higher energy costs, but output costs remained muted.
“There are signs of squeezing profit margins in Taiwan, as manufacturing companies continued to lower selling prices to stay competitive despite a pickup in energy and raw material costs,” Man said.
This will help limit upward pressure on inflation, keeping CPI at 1.1 percent this year and rising gradually to 2 percent next year, he said.
To support growth, the central bank could keep interest rates at 1.875 percent at its policy meeting later this month and lift rates by 12.5 basis points in June next year, he added.