Manufacturing activity expanded for the third straight month last month, but the pace slowed significantly for a second month in a row, indicating a more conservative outlook for the second half of the year, a report released yesterday by the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said.
The official purchasing managers’ index (PMI) stood at 51.1 last month, still above 50, which represents expansion, the Taipei-based think tank said in its monthly report.
However, the index edged down 3.6 points from April, the second consecutive month to show a month-on-month decline, evidence of a more cautious view among purchasing managers, the report said.
“This is not a good sign. The institute will closely monitor [the index’s future trend],” CIER president Wu Chung-shu (吳中書) told a media briefing.
A PMI reading of more than 50 indicates expansion and values below the benchmark signal contraction.
However, on a seasonally adjusted basis, the PMI for last month fell below the 50-point threshold for the first time this year, Wu said.
The index — a leading indicator of economic outlook over the next three to six months — comprises five major sub-indices: new orders, production, employment, inventories and supplier deliveries.
The institute attributed the slowing pace of expansion last month to the month-on-month decline in the new orders and production sub-indices, singling out new orders, which contracted to 49.1 last month.
Given a lack of market catalysts, Wu did not rule out a further decline of the index in the second half of this year.
Meanwhile, the official non-manufacturing index (NMI) also trended in a similar fashion, with the index expanding for the 10th consecutive month, but dropping 2.5 points from April to 54.8 last month, the institute said.
A separate report issued yesterday by HSBC Holdings PLC showed that Taiwanese manufacturing contracted for a second consecutive month, with a PMI reading of 49.3 for last month, albeit slightly up from April’s 49.2.
The data, compiled by information services provider Markit Ltd, pointed to a further loss of momentum in Taiwan’s manufacturing sector, with output declining for the second month in a row and new work falling at a faster rate.
In light of weaker demand and reduced production schedules, firms were hesitant to hire new staff, with employment rising only slightly, while companies continued to cut back their stock holdings, the report said.
“A drop in purchasing activity also adds to evidence that the sector is unlikely to pick up growth momentum as we approach mid-year,” Markit economist Annabel Fiddes said in a note.
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