The Nikkei Taiwan manufacturing purchasing managers’ index (PMI) dropped to 46.3 last month, from 47.5 in January, as operating conditions for local manufacturers deteriorated further due to weak demand across key export markets.
The index has been in contraction mode for five consecutive months amid ongoing US-China trade tensions.
The index is an indicator of manufacturing performance derived from new orders, output, employment, suppliers’ delivery times and stocks of purchases. A number higher than 50 indicates expansion and scores below the threshold suggest a decline.
“The latest PMI data showed the current downturn gathered pace with the falls in output and new orders being the worst in 3.5 years,” said Annabel Fiddes, principal economist at IHS Markit, which compiles the survey.
New business placed with Taiwanese producers fell sharply, with the rate of retreat accelerating to a three-and-a-half-year high, the survey showed, citing responding firms.
Weaker demand, particularly from key export markets, accounted for the latest reduction in new work, it said.
New business declined at the fastest rate in 3.5 years, while export sales fell at the quickest pace since November 2011, it said, adding that soft demand drove firms to lower their buying activity and reduce inventory levels.
As a result, firms reported a further reduction in output, with the pace of contraction also picking up to the most since August 2015, it said.
Companies cut selling prices for the third consecutive month, despite a slight increase in input costs, to gain new business, the report said.
Input costs rose for the first time in three months last month, albeit only slightly, the survey showed.
The rate of discounting was modest overall, but quicker than the long-term trend.
Input buying fell at a historic rate last month, with firms citing greater efforts to consume and streamline stocks, it said.
Inventories of purchased items dropped the fastest since October 2015, while stocks of finished goods saw the sharpest decline in three-and-a-half years, it said.
Looking ahead, firms are downbeat about their business prospects, citing lingering concerns over the trade dispute and a global economic slowdown, the report said.
Many firms share the expectation that customer demand, particularly from overseas markets, could remain subdued in the year ahead, Fiddes said.
Conservative expectations would lead firms to cut purchasing activity and production further over the coming few months, she said.
The Taipei-based Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) is to release its official PMI data on Friday.
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