PMI drops as economic growth momentum slows

WARNING SIGNS::Slowing growth in new orders led to the production sub-index posting the largest decline last month, falling to 60 from 73.7 in March

By Amy Su and Crystal Hsu  /  Staff reporters

Fri, May 03, 2013 - Page 13

Last month’s purchasing managers’ index (PMI) dropped to 56.8 from the 62.4 recorded in March, an indication that growth momentum has been slowing in the past few months, a report by the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) showed yesterday.

Last month’s 56.8 was higher than the 50-point threshold, indicating the manufacturing sector is still expanding, albeit at a slower pace, the institute added.

It was the second consecutive month the PMI stayed above the 50-point threshold of expansion.

“Despite growth slowing, the mild recovering trend in the economy did not change, according to PMI data over the past few months,” CIER president Wu Chung-shu (吳中書) told a press conference.

The PMI data produced by the Taipei-based think tank — a leading indicator of the economic outlook for the next three to six months — is comprised of five sub-indices: new orders, production, employment, inventories and supplier deliveries.

Last month’s results showed all five sub-indices remained in expansion mode, but the sub-indices of new orders and production fell significantly from March — the main factor dragging down the PMI last month.

The new orders sub-index decreased by 12.9 points to 56.7 last month from a month earlier, but stayed above 50 points for the sixth straight month, the think tank said in its monthly report.

The slowing growth in new orders led to the production sub-index posting the largest decline last month among all the five sub-indices, by falling to 60 from the 73.7 recorded in March, the report said.

PMI volatility may be sharper in the future, in line with the trend in the global economy, Wu said.

However, he expected the economy to exhibit a stronger recovery in the second half of the year, with full-year economic growth being higher than 3 percent.

The PMI figure was echoed by HSBC data released yesterday, which showed manufacturing activity grew marginally last month, with the sector improving for five months in a row.

The HSBC PMI was 50.7 last month, slowing from 51.2 in March, the British banking group said in a report yesterday.

The latest PMI reading stood above the 50-point threshold for the fifth successive month last month, suggesting that manufacturing remains in expansion mode on the back of demand in the US, Europe and at home, HSBC Greater China economist Donna Kwok (郭浩庄) said in the report.

The marginal expansion came despite a lull in demand from China, boding well for a good start this quarter, after GDP grew a disappointing 1.54 percent in the first three months, she said.

“The outlook remains challenging for Taiwan, but the data suggests a good start to the second quarter,” Kwok said.