The official manufacturing purchasing managers’ index (PMI) last month slowed to 53.5 points from 56.3 in April, with all sectors adopting conservative six-month outlooks as uncertainty builds amid rising global inflation, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究) said yesterday.
The service sector fared the worst, with the non-manufacturing index slipping into the contraction zone, as business at financial institutions, wholesalers, retailers, restaurants and hotels diminished because Taiwanese practiced self-imposed isolation, the Taipei-based think tank said.
The PMI reading last month shed another 2.8 points from April — its slowest pace of expansion in nearly two years as Russia’s invasion of Ukraine and China’s strict COVID-19 controls continued to weigh, it said.
Photo courtesy of the Chung-Hua Institution for Economic Research
The index aims to capture the health of the manufacturing industry, with values above 50 points indicating an expansion and values below 50 indicating a contraction.
The subindices on new orders and industrial output faltered into negative territory, as makers of food products, textiles, raw materials, transportation tools and machinery equipment received fewer orders.
Lockdowns in China’s key industrial and commercial cities hampered economic activity and intensified supply chain disruptions, local companies have said.
Suppliers of electronics and biotechnology products managed to hold firm, thanks to solid demand for digital transformation and innovative technology applications, CIER said.
The situation might improve this month as Shanghai reopens.
However, the survey showed that companies have generally turned pessimistic, with the six-month outlook measure declining by 8.9 points to 44, the first negative reading since June 2020.
The manufacturing industry would experience uneven results in the second half of the year, CIER vice president Wang Jiann-chyuan (王健全) said.
“Companies on the upstream side of the supply chain will fare better than downstream firms,” as companies focused on selling finished goods must tackle cost hikes and softening demand, Wang said, citing the example of notebook computer suppliers.
Non-manufacturing companies generally experienced a downturn in business as most Taiwanese have voluntarily stayed home since April to avoid contracting COVID-19, CIER said.
In a separate survey, the institute said the non-manufacturing index tumbled 10 points to 45.1, the first contraction in 10 months and the worst performance since May 2020.
A surge in locally transmitted COVID-19 infections, which have hovered above 80,000 per day over the past few weeks, also added to human resource issues, Wang said.
Many service-oriented companies are having considerable difficulty maintaining sufficient cash flow, Wang said, urging the government to provide quick relief so that the firms can survive the downturn.
Non-manufacturers expect business to deteriorate, with the six-month outlook measure slumping 9.9 points to 35.8.
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