The nation’s manufacturing purchasing managers’ index (PMI) climbed to 51.3 percent last month, ending six months of contraction, thanks to sales ahead of the Lunar New Year holiday, but companies remain conservative in outlook, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
The Taipei-based think tank said it would be premature to interpret the rebound as a sign of recovery because downside risks linger and the central bank might cut interest rates next month.
“It is not clear if the economy has bottomed out, even though the PMI shifted to expansion for the first time in seven months,” CIER president Wu Chung-shu (吳中書) told a news conference.
Photo: Pichi Chuang, Reuters
The PMI, which gauges the health of the manufacturing sector, gained 4.7 percentage points last month from 46.6 in December last year, driven mainly by demand from domestic customers, the survey found.
PMI scores of above 50 indicate expansions and values below the threshold suggest contraction.
The subindex on new orders stood at 53.4 last month, up from 45.7 in December, as firms across all sectors reported business growth on the back of Lunar New Year demand, the report said.
Consequently, manufacturers saw a general increase in output, raising the subindex to 55.3 from December’s 48.9, the report said.
The rebound is more likely an isolated phenomenon than the start of a steady recovery, as firms in different sectors have a dim view of business prospects in the coming six months, Wu said.
The subindex on the six-month outlook stood at 42.5, meaning that most firms expect business to contract, the report said.
It is common for Taiwanese firms to boost sales with discounts ahead of the Lunar New Year holiday to increase cash reserves and reduce inventory, Wu said.
The troubled global economy lends support to a conservative outlook, he said.
The private Nikkei Taiwan manufacturing PMI reached a similar conclusion with a score of 50.6 last month, reflecting a marginal improvement in overall operating conditions.
New business and output both rose slightly last month while firms continued to cut inventory positions amid relatively muted client demand, the Nikkei report said.
“Looking ahead, the global slowdown may continue to weigh on the sector’s performance given the importance of exports to Taiwanese goods producers,” said Annabel Fiddes, an economist at Markit, which compiles the Nikkei PMI survey.
The non-manufacturing index was weaker at 48.8 last month, from December’s 50, hurt by poor retail, property and information and telecommunications service sales, a separate CIER report said.
Non-manufacturing firms also expect business to weaken in the next six months, so domestic demand might not help the economy, Wu said.
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