The HSBC purchasing managers’ index (PMI) for Taiwan continued to fall last month, as global trade worsened and pre-product launches came to an end, the British banking group said in a report yesterday.
The PMI, a leading gauge of the health of manufacturing industry, dropped to 45.6 last month, compared with 46.1 in August, as the decline in manufacturing activities intensified, HSBC Greater China economist Donna Kwok (郭浩庄) said in the report.
“Key electronic product launches underpinned Taiwan’s manufacturing activity for most of the year, but new order inflows have since eased,” Kwok said.
A PMI value above 50 indicates expansion, with any value lower than this threshold pointing to contraction.
The latest figures suggested tepid manufacturing activity in the next couple of months unless final demand in major markets such as the US and China increases, Kwok said.
The sub-indices on new orders and new export orders last month both fell at their steepest rates in 10 months, as respondents said deteriorating business conditions worldwide led to reduced demand for manufactured products, the report said.
Flagging demand in domestic and international markets contributed to a fourth successive fall in manufacturing output.
However, employment at manufacturing firms held largely steady last month from August, setting a floor beneath domestic demand while consumer confidence remains fragile, the report said.
The sub-indices for both input and output prices contracted for the fifth and sixth consecutive months last month, but input prices are no longer falling as fast, suggesting a possible end to the recent decline in raw material prices in the near future, Kwok said.
Competitive pressures and weakening demand kept output prices contracting, she said.
For the July-to-September period, the report showed that new orders averaged 44, down from 50.6 in the preceding quarter, weighing down the headline PMI and industrial production readings.
This was because manufacturers stocked up in the second quarter in anticipation of a number of key electronics product launches, Kwok said.
This source of demand enabled electronics manufacturers to keep staffing levels relatively unchanged despite weakening external demand in other sectors, she said.
As new-product launches took off in the third quarter, shipment growth picked up and inventory growth started to ease, offering Taiwan’s export-oriented economy some respite, the report said.
Kwok said that the benefits of product launches have faded, as shown by slowing manufacturing activity.
Only when demand in China stabilizes will Taiwan’s exports start expanding at a healthier pace, she said.