Sat, Jul 02, 2016 - Page 12 News List

Nikkei PMI rebounds on client demand

ACTING ON EXPECTATIONS:The rate of expansion last month was moderate. A report said the continued decline in the new orders sub-index shows the need for caution

By Crystal Hsu  /  Staff reporter

The Nikkei Taiwan Manufacturing purchasing managers’ index (PMI) rebounded to 50.0 last month from 48.5 the previous month, signaling a marginal improvement in overall operating conditions due to better client demand expectations.

Purchasing activity rose slightly as companies increased production amid expectations of improving client demand, the monthly survey sponsored by the Japanese media organization showed.

“Driving the PMI higher was the first expansion of industrial output in three months, alongside a slightly faster pace of job creation, suggesting firms have become more optimistic towards their business outlook,” said Annabel Fiddes, London-based economist at Markit, a financial information services company that complies the survey.

PMI surveys aim to gauge the health of the manufacturing industry, with figures larger than 50 indicating expansion and values below the neutral mark suggesting contraction.

They are closely tracked by market watchers because Taiwan is home to the world’s largest chipmakers, chip designers, laptop and smartphone vendors, as well as critical component suppliers.

The launches of Apple Inc’s next-generation iPhone series and other products in the fall are expected to boost Taiwanese companies in the global supply chain.

Most companies gave a rosy earnings outlook for the second half of the year after posting lackluster showings in the first half.

Some companies increased their output, though the rate of expansion was moderate and most are maintaining a conservative inventory policy, the report said.

The continued decline in the sub-index on new orders lent support to the caution, Fiddes said, adding that it is the third consecutive month of decline.

The sub-index on new export orders climbed above 50, indicating demand from overseas has stabilized and ending five straight months of contraction, the survey said.

“Some firms reported firmer customer demand across a number of export markets,” Fiddes said.

Consequently, local manufacturers hired additional staff, with the job creation rate accelerating mildly from May, the report said. Firms attributed the growth in employment to the development of new products and the filling of vacancies, the report said.

Many companies maintained cautious inventory policies as evidenced by the decline of stocks of both inputs and finished items, the report said.

“Unless there is a significant upturn in customer demand, companies may soon start to restrict output and headcounts,” Fiddes said.

Input costs picked up slightly due to a rise in raw material prices, particularly for crude oil and steel, the report said.

However, output prices remained unchanged as companies absorbed higher price burdens to stay competitive, the report said.

The nation’s official PMI, compiled by the Chung-Hua Institution for Economic Research (中華經濟研究院), is due to be released on Monday.

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