Latest PMI data signalled a further loss of growth momentum across Taiwan’s manufacturing sector midway through the second quarter.
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Output rose to the weakest extent since last October, as growth in new orders slipped to a 22-month low.
Consequently, confidence towards the year ahead outlook for production fell to its lowest since last July.
At the same time, reports of stock shortages at suppliers contributed to a further sharp increase in delivery times for inputs.
Inflationary pressures remained sharp, with a further steep increase in input costs leading firms to raise their selling prices at a faster pace.
The headline Nikkei Taiwan Manufacturing Purchasing Managers’ IndexTM (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.
At 53.4 in May, the seasonally adjusted headline PMI fell from 54.8 in April.
The health of Taiwan’s goods producing sector has now strengthened in each month for the past two years.
However, the latest index reading signalled that the pace of improvement weakened to an 11-month low.
Softer increases in both output and total new orders were key factors weighing on the headline index in May.
Total new business rose at the weakest pace since July 2016, which contributed to the slowest increase in production since last October.
A number of firms commented that relatively subdued demand conditions had hampered growth.
Moreover, new export sales increased at the slowest pace for nearly two years.
Employment continued to increase across Taiwan’s manufacturing sector in May.
However, the pace of job creation softened from that seen in April.
At the same time, companies signalled sustained pressures on operating capacities, as highlighted by a further rise in backlogs of work.
The rate of accumulation was solid, despite moderating for the third month in a row.
Reflective of softer demand conditions, manufacturers expanded their purchasing activity at a weaker pace in May.
However, widespread reports of stock shortages at suppliers led to a further sharp increase in average lead times for inputs.
Meanwhile, companies reported higher inventories of both purchased items and finished goods in May, with the former rising solidly overall.
Taiwanese manufacturers signalled a further sharp rise in average input costs during May, despite the rate of inflation easing to a nine-month low.
Panellists widely attributed higher prices to greater input costs for raw materials.
The sustained and steep increase in costs led firms to raise their prices charged at the second-sharpest rate for over seven years.
Finally, confidence towards the year ahead outlook for production slipped to a ten-month low in May, with some firms citing a relatively uncertain demand outlook. ■
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