Taiwan’s manufacturing activity held steady last month, ending three consecutive months of decline, as external demand improved but remained weak, HSBC PLC said in a report released yesterday.
HSBC’s Taiwan Manufacturing Purchasing Managers Index (PMI) posted a neutral 50 last month, up from 48.6 in July, indicating operating conditions were mostly unchanged for the nation’s manufacturing sector, the report said.
“Taiwan’s manufacturing conditions were unchanged last month, suggesting that business activity is stabilizing,” HSBC economist Ronald Man (文略韜) said in the report.
A PMI score below the 50-point mark indicates a contraction and values above that threshold suggest expansion.
Total new orders declined last month, albeit fractionally with the modest drop in new export orders, suggesting weak demand from international clients in China, Europe and the US, the report said.
Production levels fell for the fourth straight month, but the rate of contraction was narrowing, the report added.
Despite the slight contraction in output, firms hired more employees for the third month in a row, raising the rate of job creation to the highest level since December last year, the report said.
HSBC attributed the additional staff to companies’ plans to increase their production capacity.
“Manufacturing payrolls picked up at the strongest rate in eight months and this should put a floor beneath private consumption,” Man said.
Input prices declined markedly for the fifth straight month last month, although the rate of deflation eased, the report said.
Lower production costs enabled firms to reduce output prices with a solid rate of discounting, the report said, adding that 11 percent of respondents cut factory gate prices as a result of competitive market pressures and price negotiations with clients.
Looking ahead, HSBC said stronger new orders are required to lift the nation’s export-focused economy out of the woods, with a 2 percent GDP growth forecast this year.
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