Wed, Oct 02, 2019 - Page 12 News List

PMI ends four months of contraction

WINDFALL:Local companies benefited from order transfers by clients seeking to circumvent trade rows between the US and China as well as South Korea and Japan

By Crystal Hsu  /  Staff reporter

The nation’s manufacturing purchasing managers’ index (PMI) last month climbed back to neutral territory, ending four straight months of decline, as the development of 5G technology ramped up business for local firms in the supply chain, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.

The critical gauge of the manufacturing industry’s health measured 50 — the dividing line between contraction and expansion — as business improved for companies involved in the production of electronics, chemical products and transportation tools, the Taipei-based think tank’s monthly survey found.

However, the improvement is not broad-based, as suppliers of food and textile products, raw materials, and electrical and machinery equipment have yet to come out of the woods, it said.

“Demand for electronics used by industrial clients gained strength, raising inventory to the normal position,” CIER president Chen Shi-kuan (陳思寬) told a media briefing.

Clients in overseas markets demonstrated more willingness to build up inventory and facilitate pending orders as uncertainty over the industry’s outlook eased, although it has yet to completely dissipate, Chen said.

Apple Inc’s launch of new products helps boost business for companies producing electronics used in smartphones, tablets and smartwatches, Chen said, adding that the advent of 5G devices next year would also provide a driving force.

The sub-index on new business orders rose from 48.9 one month earlier to 52, the survey showed.

Industrial output was 51.9 after turning positive at 51.7 in August, it showed.

Local firms also benefited from order transfers and strategic inventory building by clients seeking to circumvent trade rows between the US and China as well as between South Korea and Japan, Chen said.

As a result, the measure on raw material prices rose from 46.7 to 50.2, it said.

The private Taiwan Manufacturing PMI compiled by IHS Markit came up with similar findings, with a PMI reading of 50.

“The latest data signaled a stabilization in business conditions for Taiwanese manufacturers,” IHS Markit economist Eliot Kerr said in a statement.

However, local firms were conservative about staffing levels, leaving the sub-index on employment in contraction mode at 48.8, little changed from 48.3 in August, CIER said.

They were also cautious about their business outlook, with the six-month gauge reaching 44.9, compared with 44.5 one month earlier.

The soft sentiment is almost industry-wide, with only foodmakers showing optimism, the survey said.

Operating conditions remained fair for service-oriented firms, despite a mild slowdown in the non-manufacturing index to 51 last month, from 53.1 in August, CIER said in a separate report.

China’s travel ban weighed on the confidence of the travel industry, but firms generally find encouragement in the high season, Supply Management Institute in Taiwan (中華採購與供應管理協會) executive director Steve Lai (賴樹鑫) said.

Readings lower than 50 would be worrying, Lai said, adding that night market vouchers issued by the government might not be enough to stimulate tourist spending.

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