Thu, Sep 03, 2015 - Page 13 News List

PMI hits lowest level in survey’s history

SUPPLY CHAIN:A Supply Management Institute in Taiwan official said the market’s response to Apple’s new iPhone models would be crucial for the technology sector

By Crystal Hsu  /  Staff reporter

A deepening economic slowdown pushed the official manufacturing purchasing managers’ index (PMI) down to 45 last month, from 48.6 in July, marking the lowest level in the survey’s history, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.

Bearish sentiment has spread to the service sectors, with the institute’s non-manufacturing index (NMI) hitting 47.5 last month, sliding into the contraction zone for the first time since the Taipei-based CIER launched the survey in August last year, indicating that domestic demand-driven companies also started to feel the pinch.

The PMI is a composite indicator seeking to gauge the health of the local manufacturing sector in light of new orders, output, employment, suppliers’ delivery times and stocks of purchases.

A PMI figure greater than 50 indicates improvement of the sector’s operating conditions, while a value below the neutral mark suggests deterioration.

“The operating conditions of local companies in different sectors deteriorated last month as global demand softened and financial market volatility helped feed caution,” CIER president Wu Chung-shu (吳中書) told a news conference.

The manufacturing industry, a major player in the nation’s export-reliant economy, is likely to slip into recession if the PMI stays in contraction mode for six months, Wu said.

Protracted low PMI values would likely drive the overall economy into recession, as Taiwan is home to the world’s top contract chipmakers and chip designers, laptop and smartphone vendors, as well as critical electronics component suppliers, he added.

The CIER said that the index’s five subindices showed a contraction last month, with new orders declining to 39.9, the lowest since the institute initiated the survey in July 2012.

Wu attributed the poor performance to clients’ intentions to cut inventories rather than placing new orders on fears of oversupply.

Among local manufacturing sectors, food makers proved the only exception, unaffected by the downturn thus far, the monthly CIER report found.

The production subindex tumbled to 43.9 last month, down 5 points from a month earlier, the report said.

Supply Management Institute in Taiwan (SMIT, 中華採購與供應管理協會) executive director Steve Lai (賴樹鑫) said it is important to watch the market’s response to Apple Inc’s latest iPhone models, scheduled to be introduced on Wednesday next week, as many Taiwanese technology firms are part of the US company’s supply chain.

“A poor reception would dim the exports outlook for next quarter, the traditional high sales season for technology devices,” Lai said.

Companies in the service sector, which tend to lag behind manufacturers in adapting to changes in economic conditions, started to share a cautious outlook last month, CIER researcher Chen Shin-hui (陳馨蕙) said.

Firms in financial services, transportation, logistics, wholesale and property construction saw business contracting last month and expected the landscape to darken going forward, Chen said.

That means private consumption might not lend support to GDP growth as projected by the official statistics agency, the survey indicated.

Last month, the government lowered its GDP growth forecast to 1.56 percent for this year, compared with the 3.28 percent it previously estimated.

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