The official manufacturing purchasing managers’ index (PMI) recorded its steepest decline in its history from 48 points in November to 44.8 last month, as local manufacturers saw their business conditions deteriorating amid the US-China trade spat, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
The economic barometer has dropped below the neutral threshold for two months in a row, as poor order visibility prompted firms to cut inventory and avoid investment, the Taipei-based think tank said.
“Firms have turned from being cautious to taking risk-containment measures, accounting for the plunge in PMI readings,” CIER acting president Wang Jiann-chyuan (王健全) told a media briefing.
PMI figures gauge the health of the nation’s manufacturing industry, with values larger than 50 indicating expansion and points lower than the threshold suggesting contraction.
The latest PMI figure is also the lowest since the monthly report was launched in July 2012.
New business orders shed five points to 42.6, while industrial output sank to 43.1 — the lowest since August 2012, the report said.
All sectors took a hit, with the impact less evident for firms involved in the supply of food and textile products, it said.
The sub-index on employment was 47.7, the lowest since December 2015, the report said.
Firms mostly feel that uncertainty is their biggest headache, even though Washington and Beijing have agreed to a 90-day truce to work out their trade differences, CIER economist Chen Hsin-hui (陳馨蕙) said.
“Firms care more about when the tariff drama will end rather than how it will settle, so they can better cope with the fallout and plan response measures,” Chen said.
International oil and commodity prices have yet to show any signs of stabilization, while continuing wild swings across global bourses provide no cause for optimism, Chen said.
Wang said that it is too early to read poor PMI readings as the beginning of a recession, adding that firms might regain confidence when the US and China meet to strike a deal next month.
In the meantime, the government is planning stimulus measures to prop up domestic demand and mitigate the effects of the slowdown, Wang said.
Operating conditions are not bad for service-oriented sectors, with the non-manufacturing purchasing activity index falling to 51.6 last month from 52.3 in November, the institute said in a report.
Firms in the hospitality, real-estate and communications sectors reported improvement, due to the high sales season, it said.
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