Taiwan’s purchasing managers index (PMI) expanded for a second consecutive month last month as orders from Europe and the US increased, according to an HSBC PLC report released yesterday.
Taiwan’s PMI surged to 54.7 last month from 51.7 in November, signaling a strong finish to the year for the Taiwanese manufacturing sector, HSBC’s monthly report showed.
“Taiwan’s manufacturers are tightening their grip on recovery as European and US demand continue to hold up since reawakening from their summer lull,” Donna Kwok (郭浩庄), an economist at HSBC in Asia, said in the report.
The PMI is a leading indicator to gauge the health of the manufacturing sector. A PMI reading above 50 indicates expansion, while readings below the threshold suggest contraction.
The sub-index on new orders jumped to 56.2 last month, from 51.9 in November, marking the strongest level since May, according to the report.
The export orders sub-index was equally strong, rising to 55.7 last month from 50.9 in the preceding month.
More importantly, Kwok said, the subsequent creation of new jobs is translating into stronger local demand and has contributed to new orders.
“The longer this trend continues, the more likely Taiwan’s internal growth drivers will be able to rotate into stronger play, [therefore] lessening its exposure to the global tech cycle,” she said.
Survey respondents highlighted recovering European demand as in November, but demand from the US also contributed this time, the report said, based on a survey of about 300 manufacturing companies.
Strong demand and the subsequent increase in output helped employment improve at its sharpest rate since August, recording 53.0 last month, versus 51.9 a month earlier, the report said.
“Employment in the Taiwanese manufacturing sector rose for an 18-month running in December, as sustained rises in output and new orders drove the increase in staffing levels,” Kwok said.
Input costs increased to 80.8 last month, from November’s 79.7, the third record high, driven by higher raw materials prices, higher supplier charges and higher commodity futures prices, the report said.
The pass-through to financial consumers remained modest last month because of tough competitive conditions, the report said.
If US and European demand sustain their current pace of recovery for another few months, more meaningful signs of inflation could start to appear, Kwok said.
Suppliers’ delivery times lengthened last month, in line with the increase in input buying activity, the report said.
Stocks of finished goods rose only slightly, with the majority of respondents indicating that inventories were unchanged last month from November, the report said.
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