PMI hits 7-month high in December 2012: CIER

The December PMI index grew 1.7 percent, hitting the highest point of growth over the previous seven months. Most indices are above 50 percent, indicating an expanding economic recovery. A PMI above 50 percent refers to sector growth, while a figure below 50 percent represents economic contraction.

Economic Growth Optimism

Wu expressed optimism over Taiwan's economic growth in 2013 as the December 2012 PMI increased to 51.3 percent from 49.6 percent in November of the same year. This figure offers a positive sign of future manufacturing growth, reflecting optimism over Taiwan's future performance in exports and domestic consumption, which had been sluggish between July and November.

The monthly composite PMI consists of five sub-indices indicating new orders, production, employment, inventories and supplier deliveries.

The production indicator had the biggest growth from 51.1 percent to 54.8 percent, showing an increase in manufacturing and exports. The electronic product and machinery sectors have had the biggest increase in the past five months.

The employment index also grew to 53.3 percent from the previous 49.9 percent in November. The overall trend shows that job market has been expanding.

Supplier deliveries and inventories remained contracting in December, standing at 48.2 percent and 47.8 percent, respectively, despite November's increase.

Wu reiterated that the overall PMI shows a very positive sign of economic recovery, adding that although the index does not directly contribute to GDP growth, it offer a basis for reference.

Third Quarter to be Season for Manufacturing Boom: Expert

Supply Management Institute Taiwan Executive Director Steve Lai (賴樹鑫) said that the peak season for the manufacturing industry has past, but business seasons for enterprises that purchase raw materials are just about to take off.

With regard to the business cycle, he added that seasonal adjustment factors do not have a big effect on the growth trend, and since the manufacturing sectors are not at their peak, electronic product production may only see growth in the third quarter of 2013. That may also be the time to expect export growth, said Lai.

Lai explained that in general the first quarter will see a slight manufacturing decline due to seasonal factors.

The third quarter will be period in which the new orders index increases; as a result, high-valued and low-value manufacturing industries will also grow.

He noted that the growth of low-value manufacturing sectors is subject to the influence of different market variables, such as domestic consumption as well as target consumer markets. He also explained that the peak time for enterprises to purchase raw materials is generally two months earlier than their production time.

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