Tue, May 05, 2015 - Page 13 News List

PMI falls, remains in expansion mode

MANUFACTURERS KEY:The DGBAS said that the nation’s economy relies on the sector, which accounted for 55 percent of the 3.46 percent GDP growth last quarter

By Crystal Hsu  /  Staff reporter

The official purchasing managers ‘index (PMI) last month remained in expansion mode, but the pace slowed from a month earlier, as demand from abroad eased in line with the low technology cycle, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.

The PMI reading, which aims to gauge the health of the manufacturing industry, dropped to 54.7 last month, down 4.4 percentage points from 59.1 in March, suggesting the industry stayed on the course of expansion, but lost some steam in growth momentum, CIER president Wu Chung-shu (吳中書) told a news conference.

However, HSBC Holdings PLC held a more conservative view after its Taiwan Manufacturing PMI fell to 49.2 last month, the first contraction since August 2013, as operating conditions deteriorated.

A PMI reading of more than 50 indicates expansion and values below the benchmark signal contraction.

Companies last month continued to gain new business due to sub-indexes on new orders and output that slid to 56 and 58.8 respectively, the CIER report said.

That marked a slowdown from 66.1 and 68.3 respectively in March due to business growth and a decline between Apple Inc and non-Apple camps.

Taiwan is home to chipmakers, chip designers and critical component suppliers for Apple’s iPhone and China’s Xiaomi Corp (小米), as well as local smartphone brand HTC Corp (宏達電).

To fill orders, companies increased headcount with the sub-index on employment registering 54.2, compared with 53.7 one month earlier, the report said.

Firms in major manufacturing sectors — except the basic materials industry — all have positive outlooks based on the sub-index of six-month outlook falling to 57.4, compared with 61 the previous month, the report said.

Manufacturers are key for the nation’s economy, accounting for 55 percent of the 3.46 percent GDP growth last quarter, according to the Directorate-General of Budget, Accounting and Statistics (DGBAS).

The HSBC survey, conducted by information services provider Markit, said that new orders and output declined for the first time in four months as reduced client demand drove companies to cut back on purchasing activity.

Demand softened both at home and abroad — with fewer new orders from China, Europe and the US in particular, the HSBC report said.

“The latest data suggests the sector may struggle to return to growth territory in the near future, as companies continued to eat into their stock holdings” rather than increase purchasing activity, Markit economist Annabel Fiddes said in the report.

Furthermore, input prices continued to fall amid reports of lower raw material costs, which helped boost the bargaining power of clients and led to a further reduction in prices charged, the HSBC report said.

However, non-manufacturing sectors fared better, with the official non-manufacturing index (NMI) accelerating to 57.3 last month, from 52.8 in March, the CIER said in a separate report.

Pre-Mother’s Day promotions proved effective in boosting retail sales last month and might continue to lend support this month, Wu said.

Aside from construction and real-estate developers, firms in different service sectors hold brighter business outlooks, the NMI report said.

That would help prop up domestic demand this year while slumping crude prices distort export showings, Wu said.

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