The official manufacturing purchasing managers’ index (PMI) last month dropped to 43.7, as almost all sectors continued to adjust inventory to cope with a reduction in business, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
It is the sixth consecutive month that the economic barometer has contracted, as global inflation and monetary tightening have taken a toll on demand.
“The PMI hit a new low since the launch of the survey, as firms said they remain weighed down by inventory corrections and there are few new orders,” CIER president Yeh Chun-hsien (葉俊顯) told a news conference in Taipei.
Photo: Hsu Tzu-ling, Taipei Times
PMI readings aim to gauge the health of the manufacturing industry, the pillar of Taiwan’s exports, with values above 50 indicating expansion and those lower than the threshold indicating a contraction.
The latest PMI data affirmed that there was no peak season in the final quarter of last year — the traditional high season for consumer electronic gadgets, Yeh said, adding that there is unlikely to be a rebound ahead of the Lunar New Year either.
It is too early to tell how the market will assimilate a spike in COVID-19 cases in China following the abrupt removal of its “zero COVID” policy, he said.
The critical subindex on new orders shed 2.1 points to 39.8, reflecting sluggish demand from clients at home and abroad, CIER’s monthly survey showed.
Food and textile product suppliers proved to be the only exception, with readings of more than 60 in the purchasing activity and new order categories, thanks to a fast recovery in Taiwan’s private consumption, the survey said.
The subindex on industrial production dipped by 0.1 points to 42.7, while the employment measure gained 0.1 points to 48.4, it said.
Encouragingly, the inventory and clients’ inventory gauges were 43.5 and 48.6 respectively, suggesting a concrete decline in inventory pressures, CIER researcher Chen Shin-hui (陳馨蕙) said.
Technology firms earlier reported an excess of inventory caused by overbooking and supply chain clogs in 2020 and 2021.
“The worst [of the inventory corrections] is likely over, based on the inventory figures,” Chen said.
However, the six-month outlook was disappointingly low at 29.3, although it increased by 4 points from a month earlier, as all sectors expect poor business in the first two quarters of this year, the survey said.
The non-manufacturing index performed better, gaining 1.1 points to 53.3 — its second consecutive month of expansion, CIER said.
Yeh said that service providers are continuing to bask in “revenge consumption” as Taiwanese are growing less afraid of COVID-19.
Looking forward, only hotels and restaurants expect the upturn in business to continue in the next six months, the survey found.
Meanwhile, the S&P Global’s Taiwan manufacturing PMI last month rose to 44.6 from 41.6 a month earlier, indicating some easing of the downturn. Even so, the index has remained in contraction for seven consecutive months.
“There were widespread reports of weaker demand both at home and overseas, with firms commenting on reduced demand across Europe, mainland China and the US in particular,” S&P Global Market Intelligence economics associate director Annabel Fiddes wrote in comments accompanying the data.
“Business confidence stayed firmly in negative territory, as manufacturers anticipate further cuts to output in the months ahead,” she said. “This seems increasingly likely if signs of spare capacity persist and global demand conditions fail to recover.”
Additional reporting by Bloomberg
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