The official Purchasing Manager’s Index (PMI) fell to 51.5 last month, the lowest since March and slowing for three months running, as manufacturers turned increasingly cautious about business outlook, a report by the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
The latest PMI value marked a retreat of 1.8 points from 53.3 in September amid renewed doubts over global recovery while food safety concerns sapped consumer confidence at home.
“Except for the transportation equipment industry, all other sectors are less bullish about the business landscape ahead,” CIER president Wu Chung-shu (吳中書) told a news conference.
The PMI reading gauges the nation’s manufacturing conditions over the next three to six months with a value above 50 indicating expansion and figures below the threshold suggesting contraction.
The ongoing cooking oil scandal has deepened the uneasy sentiment, as firms, especially small and medium in size, are hesitating to build inventory for the holiday season for fear of unknowingly using tainted ingredients, Wu said.
While the food sector accounts for a modest share of GDP makeup, the oil scandal is hurting the industry’s image and revenue, he said, adding the impact is spreading to the tourism sectors.
The public will have difficulty regaining trust in food manufacturers in the short term given that a major listed company is suspected of adulterating cooking oil for years in order to save costs, Wu said.
Policymakers failed to lend a helping hand as they have not worked out a replacement mechanism yet after existing food inspection measures prove inadequate, CIER researcher Chen Shin-hui (陳馨蕙) said.
Many companies in the supply chain of food has adopted a wait-and-see attitude despite the approach of the Christmas and Lunar New Year holidays, extending the duration and severity of the food safety crisis, Chen said.
The new order sub-index, critical for Taiwan’s export-repaint economy, hardly stayed in positive zone at 50.3 last month, from 52.7 in September, while exports grew at a marginal pace from 50.2 to 50.8, the report showed.
The employment subindex held relatively healthy at 54.3 last month, from 55.3 one month earlier, the report said.
The think tank expects the job market to improve for the rest of this year, favorable for keeping unemployment lower than 3.96 percent seen in September.
Cost burdens declined for manufacturers dependent on imports of raw materials abroad thanks to falling oil prices, Wu said, adding that the trend bodes ill for firms engaged in exports of energy products.
A separate report by HSBC PLC reached similar observations with its PMI reading for Taiwanese manufacturers eased to 52 last month from 53.3 in September.
“The latest PMI data confirms that Taiwan’s manufacturing sector is going through a period of more subdued growth,” HSBC economist in Asia Johan Zhu (朱日平) said in the report.
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