The Nikkei Taiwan Manufacturing Purchasing Managers’ Index (PMI) last month slowed to 46.1 from 47.1 in July, signaling a further deterioration in operating conditions amid a global slowdown, a survey by the Japanese media organization indicated yesterday.
The pace of contraction is the fastest since September 2012, as companies reported fewer new business orders from clients domestically and internationally, according to the monthly report.
“The newest set of PMI data for Taiwan suggests the economic downturn intensified last month and the downward trend might persist in the short term unless there is a pickup in customer demand,” said Annabel Fiddes, an economist at Markit, the UK-based financial data and marketing company that conducted the survey.
The PMI is a composite indicator seeking to gauge the health of the local manufacturing sector in light of new orders, output, employment, suppliers’ delivery times and stocks of purchases.
A PMI figure greater than 50 indicates improvement of the sector’s operating conditions, while a value below the neutral mark suggests deterioration.
The sub-indices on output and new business both declined at the sharpest rates in 35 months amid weak demand, especially from clients in the US and China, the report said. Furthermore, new export orders declined at the steepest rate since November 2011.
Soft demand led companies to lower their purchasing activity, while increasing staff numbers only marginally, the report said.
Companies cut production for the fifth successive month last month, with the rate of contraction being the most rapid in nearly three years, it said.
“Production levels are unlikely to pick up in the near term given further falls in purchasing activity and inventories,” Fiddes said.
Destocking continued across the sector, with inventories of both finished goods and inputs falling markedly over the month, the report said.
As part of efforts to attract new business, companies lowered selling prices at the fastest pace since May 2009, a move confirmed by a significant drop in input costs, the report said.
Growing competition for new orders allowed clients more bargaining power and a fall in raw material costs helped weigh on input prices, the report said.
However, employment levels rose last month even though the rate of job creation eased to a marginal pace and was the slowest in three months, it said.
Weaker global demand remained a key factor dragging the sector’s performance, Fiddes said.
“Reduced output and increased deflationary pressures might drive the central bank to mull monetary-easing measures to help stimulate growth,” she said.
The central bank is due to review its interest-rate stance later this month.
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