The official manufacturing purchasing managers’ index (PMI) last month was 56.2, above the expansion mark for the 19th consecutive month, but 3.1 points lower than December, dragged by slack industrial output, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
Manufacturers remain largely positive about their business outlook, but hold different views about procurement and inventory strategies, as well as profit margin expectations, the Taipei-based think tank said.
“The latest PMI data represented the slowest expansion since September 2020 after the sub-index on industrial output slipped into the contraction zone,” CIER president Chang Chuang-chang (張傳章) said, citing the institute’s monthly survey.
Photo: CNA
PMI readings aim to gauge the health of the manufacturing industry, with scores above 50 indicating expansion and those below 50 suggesting a contraction.
Soaring raw material prices squeezed profit margins, while COVID-19 outbreaks around the world disrupted operations, Chang said, adding that the holiday season also weighed.
The critical gauge on new orders declined 7.1 points to 52.6, the softest increase since July 2020, while the industrial production index tumbled 10.4 points to 49.8, the first contraction in 18 months, the survey showed.
The sub-index on inventory added 2.2 points to 56.7, while customers’ inventory rose 2.4 points to 50.7, it showed.
The sub-index on raw material prices gained 2.7 points to 76.6, a phenomenon that has benefited companies on the upstream side of the supply chain, but heaped pressure on profit margins for downstream companies, Chang said.
The reading on delivery schedules increased 0.6 points to 65.6, a sign that supply chain disruptions and port congestion are lingering, he said.
Economies around the world have showed signs of a slowdown this year, especially Taiwan’s two largest export destinations, China and the US, Chang said, adding that would mean domestic demand would have to bolster Taiwan’s GDP growth.
Taiwan would have to learn to coexist with the Omicron variant of SARS-CoV-2, and ease disease prevention measures and quarantine restrictions as most other nations have opted to do, he said.
The non-manufacturing index fell 4.7 points to 53.9, suggesting business improvement ahead of the Lunar New Year holiday, the institute said in a separate survey.
However, a significant number of firms turned conservative about their business prospects after COVID-19 infections increased and authorities tightened disease prevention measures, Chang said.
The reading on the six-month business outlook sub-index slumped 11.6 points to 53, as restaurants, hotels, retailers, telecoms and logistic service providers are expecting a downturn, he said.
GDP growth of more than 4 percent this year in Taiwan hinges on whether service-focused sectors emerge from the COVID-19 pandemic, he added.
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