The official manufacturing purchasing managers’ index (PMI) accelerated to 54.2 last month from 53.3 one month earlier, as operating conditions strengthened across the sector, buoyed by inventory building ahead of the high sales season, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
It is the fifth consecutive month that the PMI settled above the neutral mark of 50, suggesting a stable economic recovery, although the pace is modest and fragile.
“The latest PMI data confirmed a stable sector-wide expansion that may lend support to the overall economy in the second half of the year,” CIER president Wu Chung-shu (吳中書) said.
The privately conducted Nikkei Taiwan Manufacturing PMI reached a similar conclusion with a reading of 51 for last month, as business activity picked up, thanks to better demand from major trading nations.
PMI readings aim to capture the pulse of the manufacturing industry, the backbone of the nation’s economy, with scores above 50 indicating expansion and points below the threshold suggesting a contraction.
The sub-index on new orders increased to 54.9, with almost all sectors receiving more orders, the CIER report said.
The upcoming launch of Apple Inc’s next-generation iPhone model is believed to underpin the improvement, as many Taiwanese technology firms are in its supply chain.
The sub-index on production rose to 58.3 last month, gaining 3 percentage points from one month earlier, as all sectors increased their output, though the pace of expansion slowed for some firms, the report said.
Stronger demand led manufacturers to add headcount, lifting the sub-index on employment to 53.1, up 2 percentage points from June, the report said.
Improved export sales drove up inflationary pressure, with input prices rising rapidly due to higher raw material costs for steel and crude oil, the Nikkei PMI report found.
“The sharp pickup in inflationary pressures raised concerns, as the recovery remains fragile,” said Annabel Fiddes, an economist at Markit, which compiles the Nikkei PMI.
Fiddes cited a subdued global economic outlook and tepid domestic demand as downside risks that might weaken growth going forward.
In related developments, service-oriented sectors also fared better last month, as the non-manufacturing index (NMI) climbed to 54.4, the highest since June last year, a separate report by CIER showed.
Firms in all sectors saw stronger business activity, including builders and real-estate related service providers, the NMI report said.
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