The nation’s purchasing managers’ index (PMI) posted its strongest expansion in more than two years, indicating that the domestic manufacturing sector had rebounded sharply from the economic slump, a survey released by HSBC said yesterday.
The survey showed the index climbing to 61.7 last month, its highest since October 2007, because of continued growth in incoming new businesses.
“Taiwan’s economy continued on the path of robust recovery at the beginning of the year. Virtually, all activity indicators pointed to an acceleration of growth since December,” Frederic Neumann, senior Asian economist at HSBC, said in the report.
New export orders surged, driven by the ongoing recovery in global economic conditions, especially exports to the US, Europe, China and Japan, the report said.
“The sustained rise in new orders, both domestically as well as from abroad, suggested that the island’s economy will register another bumper quarter of economic growth,” Neumann said.
With the rise in new order volumes outpacing the increase in production, backlogs increased further and at their strongest pace in history, the report said.
However, stocks of finished goods were reported to have risen solidly to above the 50 non-change threshold last month, snapping a 20-month streak of contraction, as manufacturers prepared stocks beforehand in anticipation of further rises in new order volumes, the report said.
Meanwhile, with the expectations that the pressure on production capacity would continue to grow, employment in the manufacturing sector increased for a seventh straight month to a level of nearly 60 last month, it said.
“Encouragingly, firms continued to hire staff at a marked pace,” Neumann said, while noting that resurging growth was also stoking inflation with input and output prices rising at historically high rates last month.
A further rise in raw material prices, in particular for metals and petroleum, stimulated a considerable increase in input costs for local manufacturers last month, it said.
Stocks of purchases also rose last month not only because of positive demand forecasts, but also in anticipation of input cost increases, the survey said, adding that purchasing activity expanded at the fastest pace since August 2008.
Worried that the inflation would continue to build, Neumann said he expected “a rate hike before the end of the quarter” because “the central bank may not sit idly by.”
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