Taiwan’s purchasing managers’ index (PMI) shrank for the third straight month last month because of decreased volume of new orders and accelerated input cost inflation, a survey by HSBC Holdings PLC showed yesterday.
The PMI, a composite indicator to gauge the health of an economy’s manufacturing sector, fell sligthly to 48.6 points last month from 49 in September, marking a 20-month low. The latest plunge was the strongest in the three-month downward sequence.
“Reducing levels of incoming new business continued to drive a decline in output and, subsequently, the headline PMI,” HSBC said in the report.
A reading above 50 means the industry is expanding, while a score below that level indicates contraction.
Manufacturers reported a solid reduction in new business received last month. The contraction rate of new orders slowed fractionally for the second consecutive month, but it remained in stark contrast to the long-run average for the measure.
“Taiwan is encountering more turbulence from the global tech cycle,” Donna Kwok (郭浩庄), HSBC economist on Greater China, said in the report.
Export orders received by local manufacturers decreased last month, although the decline has slowed. Output contracted for a fourth straight month with the contraction pace remaining relatively flat since August.
Backlogs of work decreased for a second consecutive month last month, signaling that a degree of excess capacity was prevalent amongst manufacturers as new orders continued to decline, the report said.
The survey said that the rise in employment in the manufacturing sectors had drawn to a near-standstill, since the relevant index posted only fractionally above the 50 no-change threshold.
“Jobs are still being created, but choppy external conditions and the resultant hit on output and orders is starting to hold back headcount growth,” Kwok said.
Input costs faced by manufacturers increased considerably last month, which the report attributed to a rise in global raw material prices and the unfavorable variations in the value of the yen.
Output prices also increased the most since May, although the rise was relatively weak compared with the increase in costs, the report said.
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