Local manufacturers last month remained resilient thanks to inventory demand, despite poor market visibility, while service-oriented firms reported that business took a nosedive amid a COVID-19 outbreak, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
The official manufacturing purchasing managers’ index (PMI) climbed 1.4 points to 52.7 last month, pushed up mainly by the subindices on delivery time and unfinished orders, as the virus disrupted shipments, the Taipei-based think tank said in a survey.
“Demand from the supply side, instead of end-market demand, accounted for the PMI increase, reflecting the predicament facing local manufacturers,” CIER president Chen Shi-kuan (陳思寬) told a news briefing in Taipei.
Many local firms are finding it difficult to deliver goods to their clients or obtain the materials needed to produce electronic components, because of travel restrictions and a shortage of labor in China, Chen said.
The gauge on delivery time rose from 57.1 to a record of 63.1, while the index on unfinished orders climbed from 52.9 to 55.9, the institute’s monthly survey showed, although almost all sectors saw a solid decline in new business and export orders.
The inventory gauge sank from 42.9 to 40.7, indicating that clients ran out of stock but hesitated to build up more, Chen said.
PMI values above 50 suggest an expansion, while readings below the threshold indicate a contraction.
Concerns over supply chain disruptions prompted some firms to frontload inventory, which might create correction pressure if the epidemic drags on, CIER said.
The subindex on new business orders grew from 55 to 56.9, with companies involved in supplying raw materials being the primary beneficiaries, it said.
The industrial output gauge improved from 41.7 to 48.6, CIER said.
The subindex on the business outlook for the next six months plunged from 63.7 to 36.8, the sharpest decline in recorded history as firms failed to see order visibility beyond April, CIER researcher Chen Shin-hui (陳馨蕙) said.
“COVID-19 poses an evolving risk for local manufacturers and there is no room for optimism,” Chen Shin-hui said.
Companies reliant on domestic demand fared worse in the non-manufacturing purchasing managers’ index (NMI), which tumbled at the fastest pace in recorded history from 55 to 40.4, ending 11 straight months of expansion, a separate survey by the CIER found.
Restaurants and hotels suffered the most, with a bleak NMI score of 16.1.
Service-oriented companies are struggling to survive supply chain disruptions and reduced consumer activity, the institute said.
Most sectors have a dim view of business given that the six-moth outlook was 26.6, a steep decline from 56.7 a month earlier, it said.
“Hopefully, relief measures provided by the government can help ease the pinch,” Chen Shi-kuan said.
NOT ALL GOOD: Analysts warned that other data for last month might be less rosy due to the virus and analysts expect the PMI to contract again next month Chinese factory activity saw surprise growth last month as businesses went back to work following a lengthy shutdown, but analysts said that the economy faces a challenging recovery as external demand has been devastated by the COVID-19 pandemic, while the World Bank said that growth could screech to a halt. China is slowly returning to life after months of tough restrictions aimed at containing the virus, which put millions of people into virtual house arrest and brought economic activity to a near standstill. The strict measures saw a closely watched gauge of manufacturing plunge to its lowest level on record in February,
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