The nation’s manufacturing activity slowed last month due to disappointing economic data from Europe, according to a report released by the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday.
The official purchasing managers’ index (PMI) slid 3.1 points from July to reach 55.4 last month, marking the lowest level seen since February, the Taipei-based think tank said in the monthly report.
A reading of 50 and above represents expansion and less than 50 signifies a contraction.
However, the month-on-month decline of the index — a leading indicator of the economic outlook over the next three to six months — indicates that expansion is set to slow going forward.
“Although the economy is still expanding, last month’s figures raised caution on future sentiment, with the movement in the PMI over the next few months an important indicator to be watched,” CIER president Wu Chung-shu (吳中書) told a press conference.
Wu attributed the decline in PMI to the gas pipeline explosions in Greater Kaohsiung on July 31 and Aug. 1, which hurt development in the nation’s petrochemical sector, as well as the slower-than-expected economic recovery in Europe.
Shinkong Synthetic Fibers Corp (新光合成纖維), which makes polyester fibers and plastics, said yesterday that the weak economy in Europe does have a negative impact for the company, but the influence is mild.
Sales of Shinkong Synthetic Fibers in Europe account for less than 10 percent of its revenue, associate general manager Kevin Ho (何奇峰) said in a telephone interview.
The company is affected more by the economic downturn in Europe in an indirect way as Europe is the end market for some of Shinkong Synthetic Fibers’ clients, Ho said.
Ho said the economy in Europe was mainly dragged down by the tension between Russia and Ukraine.
The PMI index comprises five major subindices: new orders, production, employment, inventories and supplier deliveries.
The new orders subindex showed the largest month-on-month decrease of the five sectors last month, shrinking 7 points to 55.3, followed by the production subindex, which dropped 6.2 points from a month earlier to 56 last month, the report said.
In addition, the employment subindex fell 4.5 points to 54.7 last month from July, the data showed.
Howver, the subindices of supplier deliveries and inventories both showed a month-on-month rise last month, up 1.6 points and 0.8 points to 55.8 and 55.3 respectively, the report said.
All of the five sectors were above the 50 points indicating expansion, according to the report.
Notably, the sub-index on employers’ outlook over the next six months — a reference indicator not included in the PMI’s five major sub-indices — stood at 60.6 last month, remaining above 60 for the eighth straight month but dropping to the lowest level for this year.
The decline last month was mainly driven by a more pessimistic outlook shared by polled managers at the chemical, biotechnology and medical industry, as well as the electrical and mechanical equipment sector, the institute said.
additional reporting by Camaron Kao