The Nikkei Taiwan manufacturing purchasing managers’ index (PMI) last month dropped to 56 from 56.9 in January as demand for exports remains strong, although export growth slowed a bit due to seasonality.
The latest PMI data signaled an overall pickup in the nation’s manufacturing industry in terms of output, new work and employment, despite its value standing at its lowest level in four months, the monthly report said.
“Strong global demand continues to shore up Taiwan’s manufacturing performance as seen in a sustained and sharp increase in new export orders,” said Annabel Fiddes, principal economist at IHS Markit Ltd, which compiles the survey.
PMI aims to capture the health of the manufacturing industry, with figures above 50 indicating expansion and scores below that suggesting business contraction.
As companies generally reported healthy growth in business from demand at home and abroad, they expanded their purchasing activity at the greatest rate since January 2011, while stocks of purchased items increased at the fastest pace since May 2011, the report said.
Manufacturers also added to their workforce, but the payroll growth rate eased to a four-month low, it said.
With new orders still rising more rapidly than output and backlogs of work accumulating at the fastest pace in nearly eight years, the sector would ramp up production in coming months, Fiddes said.
However, inflationary pressures intensified, with average input costs and output charges both increasing at sharper rates, the report said.
A combination of an increased demand for inputs and stock shortages led to a further deterioration in suppliers’ performance, it said.
However, manufacturers in Taiwan signaled a steep increase in cost burdens, with input prices advancing at the sharpest rate in seven years, it said.
Firms linked higher costs to a broad-based increase in raw material prices and many of them raised their charges at the greatest rate since March 2011, it said.
“Costs represent a key concern for many companies, as input prices continue to rise at a faster pace than output charges, leading to a squeeze on margins,” Fiddes said.
Nonetheless, firms are upbeat about the business outlook, with the sentiment gauge rising to a 10-month high, and a considerable number of companies expect improving global demand to boost output this year, the report said.
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