Fri, Apr 07, 2023 page12

• Bank failures return PMI to contraction

  RESTOCKING SAPPED: An earlier rebound was spurred by recovery expectations and did not reflect an improvement in end-market demand, a think tank said

  • By Crystal Hsu / Staff reporter
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  The official manufacturing purchasing managers’ index (PMI) last month returned to contraction, as the collapses of US regional banks sapped restocking demand and raw material prices, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.

  The leading economic indicator, which aims to gauge the health of the manufacturing industry, registered at 47.3 last month, down from 51.4 in February, as rush orders ended amid a lingering global slowdown, the Taipei-based think tank said.

  “The earlier rebound was spurred by expectations of a recovery in the second half of this year, rather than reflecting improvement in end-market demand,” CIER president Yeh Chun-hsien (葉俊顯) told a news conference in Taipei.

  

  From left, Supply Management Institute in Taiwan (SMIT) executive director Steve Lai, Chung-Hua Institution for Economic Research (CIER) vice president Chen Shin-horng, CIER president Yeh Chun-hsien, SMIT advisor Jerry Pai and CIER researcher Chen Shin-hui attend a news conference in Taipei yesterday to release last month’s manufacturing purchasing managers’ index data.

  Photo: Hsu Tzu-ling, Taipei Times

  PMI data of 50 and higher indicate business expansion, while values below the threshold suggest contraction.

  Firms traditionally rebuild inventory after the Lunar New Year holiday, and this year the inventory replenishment occurred in February given the late-January end to this year’s holiday, Yeh said.

  Order visibility remains poor, with the subindex of new business shedding 6.6 points to 44.5, the CIER survey showed.

  The subindex on industrial output tumbled 10.4 points to 52, while the employment measure lost 3.4 points to 45.5, indicating that firms shrank their capacity and payroll to cut operational costs and support selling prices, it showed.

  Liquidity risks linked to the failures of US regional banks negatively affected raw material prices and recovery expectations, Yeh said.

  The gauge of raw material prices dropped 6.1 points, but remained relatively high at 56.5, the survey showed.

  Firms upstream of supply chains began to build critical raw materials in anticipation of a market turnaround, Yeh said, adding that they have forged close ties with clients and can more easily pass on rising costs.

  However, firms downstream have experienced profit pressure, as they grapple with growing overhang amid tepid sales, dimming the chance of cost transfers, Yeh said.

  Those firms should increase their long-term cash positions in the face of unfavorable operating conditions, he said.

  Manufacturers are slightly more positive about their business prospects, with the six-month outlook gaining 1.5 points to 46.2, the CIER survey showed.

  Firms in the chemical and biotechnology sectors are most optimistic when compared with other companies, it showed.

  The non-manufacturing index fared well at 53.2, up from 50.2 in February, as almost all non-manufacturing sectors reported business advances, the survey showed.

  Financial, hospitality and transportation service providers predict continued business improvement, helped by the continued loosening of COVID-19 restrictions, it said.
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