Thu, Feb 06, 2020 - Page 12 News List

Manufacturing purchasing managers’ index expands for fourth straight month

CAUTION:The survey was conducted before Jan. 23 and does not reflect the impact of a novel coronavirus outbreak and China locking down cities, CIER said

By Crystal Hsu  /  Staff reporter

The official manufacturing purchasing managers’ index (PMI) last month remained healthy at 51.3, but is expected to take a hit going forward as the 2019 novel coronavirus (2019-nCoV) outbreak in China is disrupting supply chains and consumer activity, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.

The disruption is bound to dent the Taiwanese economy in the first half of the year, with non-manufacturing sectors unlikely to recover pent-up demand like manufacturers, even after the virus is contained, economists said.

The latest PMI survey was conducted before Jan. 23, when China locked down some cities, and is therefore unable to reflect the impact of the outbreak, CIER president Chen Shi-kuan (陳思寬) told a media briefing in Taipei.

The lockdown has disrupted consumer electronics supply chains and transportation, but they might benefit from delayed demand once the health crisis is over, Chen said.

Service-oriented sectors — airlines, hotels, retail and entertainment, which have been affected the most — would see comparatively slower recovery, because they cannot redeem business losses, she said.

PMI values above 50 indicate business expansion and a reading below the threshold suggests a retreat. The gauge has expanded for four straight months.

While most manufacturing sectors improved, the pace of increase lost some steam from December, in line with a slow season, the survey found, adding that raw material and machinery equipment suppliers contracted.

The outbreak would hurt Taiwan’s economy in the first two quarters as the flow of people and goods in China has almost come to a halt, Academia Sinica Institute of Economics director Kamhon Kan (簡錦漢) said.

Research bodies would soon cut their forecasts for Taiwan’s GDP growth this year, Kan said, without elaborating.

Supply Management Institute in Taiwan (中華採購與供應管理協會) executive director Steve Lai (賴樹鑫) said that the supply chain disruption is most evident and serious for companies that sell electronics and auto components.

“Local electronic firms would be in trouble if their Chinese suppliers cannot provide printed circuit boards” used in computers, televisions, mobile phones and home appliances, Lai said.

However, local semiconductor firms would remain resilient as China has little command over the industry, Lai said.

The non-manufacturing index came in at 55, reflecting robust operating conditions for service-oriented firms for the 11th consecutive month, CIER said.

The situation might change as the 2019-nCoV is rapidly spreading, chilling consumer sentiment and activity, Chen said.

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