TAIPEI: The manufacturing purchasing managers’ index (PMI) contracted to 45.1 last month, down from 46 the previous month, indicating a further deterioration in operating conditions for local manufacturers, the Chung-Hua Institution for Economic Research (CIER) said yesterday.
It was the fifth straight month of contraction for the economic barometer, a critical gauge of the manufacturing industry’s health, as external demand failed to show an improvement, despite the high-sales season for technology components and devices.
“The latest PMI data suggest the economic state remains both weak and slow” after slipping into a downturn last quarter, CIER president Wu Chung-shu said at a media briefing.
The nation’s export-focused economy entered a recession in the past two quarters, according to Directorate-General of Budget, Accounting and Statistics data, but the government is standing by the year-on-year comparison, under which the second-quarter reading managed a 0.57 percent increase.
Wu attributed the soft purchasing activity to conservative market sentiment and continued inventory adjustments.
PMI scores above 50 signify business expansion and values below the threshold indicate contraction.
The sub-indices on new orders and production have weakened for five consecutive months, falling to 44.9 and 45.3 respectively last month, as domestic and international clients cut their inventories to avoid a supply glut amid the global economic slowdown, the CIER said.
With the exception of food manufacturers, firms in all sectors tightened their belts and adopted a negative view about the business outlook in the next six months, the survey showed.
The nation’s main trading rivals such as South Korea, Singapore and Hong Kong fared similarly badly, affirming a slack worldwide trade to which Taiwan is not immune, Wu said, adding that the chance of a recovery appears dim in the current quarter in light of the data released so far.
The sub-index on employment dropped to 45.7 last month from 47.8 in October, heaping pressure on the job market and the prospects for private consumption.
The government has introduced travel subsidies in the hope that domestic demand might keep GDP growth in positive terrirtory this year.
That goal is under threat after the non-manufacturing index registered 48.7 last month, down from 50.8 in October, meaning operating conditions turned from expansion to contraction last month, the Taipei-based think tank said in a separate survey.
While non-manufacturing businesses continued to add employees last month, many expect the landscape to darken, the second survey said, as domestic demand is heavily reliant on exports.