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Taiwan manufacturing PMI rises in November

TAIPEI, Taiwan -- Taiwan's manufacturing purchasing managers' index (PMI) registered 52 points in November, up 0.4 points from October, according to a report released by the Chung-Hua Institution for Economic Research (CIER, 中經院) yesterday.

PMI is a gauge of manufacturing expansion in which any score above 50 points represents expansion and any score below indicates contraction.

While Taiwan's manufacturing sector has expanded since March of this year, the pace of expansion had been declining for seven consecutive months. November marked the first time in eight months that the pace of expansion marked a positive change.

Of the five sub-indices, the new orders expansion index stood at 52.7 points, the production index at 53.6, the employment index at 53.7, the supplier deliveries index at 50.8 and the inventories index at 49.3.

Electronics and Optical Industry Underperform

Of the six manufacturing industries, except for the electronics and optical industry (for which PMI was pegged at 48.8), all industries reported growth in November. In the order of magnitude of expansion, the industries were: transportation equipment (64), electrical and machinery equipment (56.1), chemical, biological and medical (53.5), basic raw materials (53.5), and foods and textiles (52.1).

The electronics and optical industry has experienced contraction over the past two months. Since the industry comprises a large portion of Taiwan's exports, the industry's weak performance took a heavy toll on Taiwan's GDP growth this year, which was forecast at 1.74 percent by the Directorate-General of Budget, Accounting and Statistics.

While exports did not perform as well as previously expected, private domestic demand remained stable, Wu said, adding that if the electronics and IT sector regains momentum next year, Taiwan may experience higher economic growth at that point. Wu said that Taiwan's strength in IC design and new “cloud” technologies may help boost Taiwan's IT sector.

Pessimistic Outlook

Two indices showed anomalise in November. The PMI for new export orders was pegged at 46.9, a 0.9-point downward adjustment from the previous month's score of 47.8. The economic outlook (for the next six months) index was pegged at 48.3, which was slightly higher than 47.3, the mark that the index registered in October.

Nevertheless, exports usually jump in the fourth quarter because of Christmas shopping season. The low indices for new export orders and economic outlook were “very unusual,” CIER President Wu Chung-shu (吳中書) said.

This phenomenon was particular obvious in the IT sector. CIER pointed out that sales of HTC were worse-than-expected in the fourth quarter, and the company even delayed some of its product launches from Christmas shopping season until the Chinese New Year.

Furthermore, Apple's sales also did not go as well as expected, hurting local manufacturers responsible for supplying the computer giant. Supply Management Institute Taiwan Executive Director Steve Lai (賴樹鑫) pointed out that local technology companies' innovation capabilities have declined over recent years, in turn hurting their performance in the fourth quarter.

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