PMI signals solid deterioration in Taiwan's manufacturing
Staff Writer |
February survey data signalled a faster deterioration in overall operating conditions faced by Taiwanese manufacturers.
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Production and overall new work both declined at the fastest rates for three-and-a-half years, while export sales fell at the quickest pace since November 2011.
Weaker demand conditions meanwhile led firms to sharply lower their buying activity and reduce their inventory levels.
As part of efforts to stimulate new work, companies cut their selling prices for the third month in a row, despite a slight increase in input costs.
Looking ahead, sentiment regarding future output turned slightly negative, which was often linked to the ongoing China-US trade dispute and projections of a global economic slowdown.
The headline Nikkei Taiwan Manufacturing Purchasing Managers’ Index (PMI) is a composite single-figure indicator of manufacturing performance.
It is derived from sub-indices for new orders, output, employment, suppliers’ delivery times and stocks of purchases.
Any figure greater than 50.0 indicates an overall improvement in operating conditions.
The seasonally adjusted headline PMI posted below the neutral 50.0 level at 46.3 in February, to signal a deterioration in the health of Taiwan’s manufacturing sector for the fifth month in a row.
Moreover, the index was down from 47.5 in January, to mark the quickest rate of decline for three-and-ahalf years.
The amount of new business placed with Taiwanese goods producers fell sharply in February, with the rate of reduction accelerating to a threeand-a-half-year record.
According to panellists, weaker overall demand conditions, particularly across key export markets, underpinned the latest reduction in new work.
Furthermore, export sales fell at the quickest pace for over seven years.
As a result, firms reported a further reduction in output, with the pace of contraction also picking up to its sharpest since August 2015.
Input buying fell at a historically marked pace in February, as firms cited greater efforts to consume and streamline current stocks.
Furthermore, inventories of purchased items fell at the quickest rate since October 2015, while stocks of finished goods fell at the steepest pace for three-and-a-half years.
Fewer new orders enabled firms to reduce the level of work-in-hand, with the rate of backlog depletion accelerating to the fastest for 42 months.
Meanwhile, staffing levels fell only slightly in February, as has been the case in each of the past three months.
Average input costs increased for the first time in three months in February, albeit only slightly.
However, companies continued to cut their output charges as part of efforts to gain new business.
The rate of discounting was modest overall, but quicker than the long-run trend.
Concerns over the ongoing China-US trade dispute alongside expectations of a global economic slowdown weighed on sentiment towards the yearahead, which slipped into negative territory during February. ■