The S&P Global Taiwan Manufacturing Purchasing Managers’ Index (PMI) last month slipped to 44.3, from 44.6 in December last year, as firms were more frugal and cut selling prices to cope with ongoing inventory corrections caused by global inflation and interest rate hikes.
The deterioration of operating conditions affected all sectors, with firms blaming it on slack demand, S&P Global said.
“Business conditions across Taiwan’s manufacturing industry remained challenging at the start of this year, as weak global demand led to a further sharp contraction of output,” S&P Global Market Intelligence associate economic director Annabel Fiddes said in a statement.
Photo: Ritchie B. Tongo, EPA-EFE
Last month’s decline was among the steepest since the survey was launched nearly two decades ago, Fiddes said.
PMI data aim to gauge the health of the manufacturing industry, with scores of 50 and higher indicating expansion and values below the threshold indicating contraction.
Total new business declined substantially to the weakest pace since June last year, S&P Global said.
The downturn in new exports worsened, as high inventory levels and poor global economic conditions weighed on sales, it said.
A continued decline in new orders caused manufacturers to cut output for the 10th month in a row, S&P Global said.
A decrease in new work and production prompted firms to reduce input purchases, and trim inventories of finished and purchased items, it said.
Appetite for new staff remained muted with employment broadly unchanged for the second month in a row, it said.
Inflationary pressures eased, as average input costs rose slightly due to increased prices for some raw materials, it said.
Producers cut selling prices for the second straight month at the request of buyers and as part of efforts to pass on cost savings to customers, S&P Global said, adding that, although modest, the rate of discounting was the highest since June 2020.
Firms are downbeat regarding business in the coming 12 months, voicing concerns that economic uncertainty, cost pressures and lackluster sales could continue to reduce output, it said.
“The business mood remained somber with firms [expecting] output to fall over the next 12 months,” Fiddes said.
Poor confidence led companies to trim buying activity and inventories, and restrict recruitment, she said.
On an encouraging note, inflationary pressures were mitigated by improvements in some supply chain areas, Fiddes said.
Efforts to attract and secure new work resulted in factory gate prices declining further, she added.
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