The official manufacturing purchasing managers’ index (PMI) fell to 47.9 last month in the third consecutive monthly contraction as firms held off on purchases ahead of the Lunar New Year, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
That meant a further deterioration in the operating conditions for the manufacturing industry at the start of the year, which might not improve in the coming few months, the think tank said.
“Firms are generally conservative about business in the first half of this year, but are looking at improvement in the second half,” CIER president Chen Shi-kuan (陳思寬) told a news conference.
The index gauges the health of the local manufacturing industry, with values larger than 50 indicating expansion and lower than that suggesting contraction.
Although the latest reading represented a 3.1 point increase from December last year, it should not be read as a rebound, as the bottom has not yet been reached, Chen said.
The slowdown swept across all sectors, except suppliers of food and textile products, the CIER said, adding that that the two sectors received a boost in the run-up to the Lunar New Year.
The six-month outlook was 34.9, compared with 33.2 in December, as most firms expect business to remain weak, the survey said.
Supply Management Institute in Taiwan (中華採購與供應管理協會) executive director Steve Lai (賴樹鑫) said that the landscape looks foggy ahead.
“It is too early to talk about a recovery,” Lai said.
Fast-growing artificial intelligence applications and the rise of 5G services could be the next business catalysts as technology evolves, Lai said.
The Nikkei Taiwan Manufacturing PMI report reached similar conclusions, saying that local firms signaled solid falls in both production and total new work, with new export sales declining at the sharpest pace since August 2015.
Consequently, firms cut purchasing activity and lowered their inventories of purchased items and finished products, said Annabel Fiddes, principal economist at IHS Markit, which compiles the private survey.
Meanwhile, lower pressure on capacity led to a further fall in backlogs, even though staffing levels fell for the second month in a row, Fiddes said.
Input prices declined again last month, leading firms to cut their selling prices more than they had done in nearly three years, she said.
Operating conditions also turned soft in service-oriented sectors, with the non-manufacturing purchasing activity index falling from 51.6 to 49 last month, the CIER said in a separate report.
Firms in the finance and insurance, wholesale and retail sectors reported declines in business as the economic slowdown weakened services demand, the report said.
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