The manufacturing sector could recover and expand this month on the back of an increase in new orders, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday, after launching its first official purchasing managers’ index (PMI) report for Taiwan.
The Taipei-based think tank was commissioned by the Council for Economic Planning and Development to start work on a government-backed purchasing managers’ index (PMI) for Taiwan in November last year.
In collaboration with the Taiwan Supply Management Institute (中華採購與供應管理協會), CIER launched its pilot report in June, which was followed by five straight months of PMI reports on a trial basis, until the official launch yesterday.
The latest report showed that the PMI rose to 49.6 points last month from 46.7 a month earlier, indicating that manufacturing activity remained slow.
A PMI value of 50 indicates expansion, while a figure below it signifies contraction.
The composite PMI — a leading indicator of the economic outlook in the next three to six months — consists of five sub-indices: new orders, production, employment, inventories and supplier deliveries.
“Despite entering a fifth straight month of contraction, the pace of decline in the PMI slowed last month,” CIER president Wu Chung-shu (吳中書) told a press conference.
With the economy picking up, Wu expected the PMI to rise above the 50 mark this month.
Wu attributed his optimism to a rebound in new orders, which surged to 52.4 points last month from 42.5 in October, ending four straight months of contraction.
“The sharp rebound in new orders signaled further growth momentum for the PMI in the near future,” Wu said.
Production also ended four months of declines and stood at 51.1 points last month, up 5.2 points from October, the report showed.
However, employment, supplier deliveries and inventories remained under the 50-point threshold last month, standing at 49.9 points, 47.9 points and 46.5 points respectively, the report said.
Premier Sean Chen (陳冲), who also attended the press conference, said the PMI could show an uptrend next year amid a cautiously optimistic view of the economy for that year.
Citing the PMI’s role in gauging the near-term economic outlook, CEPD Deputy Minister Wu Ming-chi (吳明機) said the council planned to add the indicator to its composite economic monitoring indicators in the future. He did not specify when the council plans to make the adjustment.