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Manufacturing sector expands in January: CIER

TAIPEI, Taiwan -- Taiwan's Purchasing Manager Index (PMI) registered 54.1 in January, up 0.5 points from the previous month, according to a report released by the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday.

PMI measures manufacturing expansion; any score above 50 points represents expansion and any score below indicates contraction.

January's PMI was affected by the Chinese New Year, CIER President Wu Chung-shu (吳中書) said. As specials and sales in the holiday season drew to a close in February, the PMI in the month may not be as good as in January.

Of the six manufacturing industries, except for the basic raw materials industry, all other industries (chemical, biological and medical, transportation equipment, electronics and optics, electrical and machinery equipment as well as foods and textiles) exhibited expansion from the previous month.

The foods and textiles industry performed especially well and its index went up 12.9 points, which was the highest recorded gain since April of last year. Sales during the Lunar New Year holiday were one of the main contributors to the growth.

Optimism about a 3-percent GDP Growth in 2014

Wu said that “the economy is slowly warming up as the growth trend of PMI gradually climbs.” He said that with the world economy on track for recovery, both exports and domestic demand may see growth this year. Wu told the press that there is a good chance that Taiwan will see a 3-percent economic growth rate in 2014, much higher than the 2.19 percent recorded in 2013.

The National Development Council recently set the goal to strive for a 3.2-percent GDP growth rate in 2014. According to the CIER's forecast released in December last year, Taiwan will see a 3.03-percent GDP growth this year. Taiwan Institute of Economic Research, on the other hand, predicted 3.17-percent GDP growth this year.

Firms Optimistic about Future

Firms in general are more optimistic about the economic outlook. The “six-month outlook index” went up 10.3 points, compared to the previous month. It was the highest climb since February last year. The index was pegged at 65.1 and has been going up for two consecutive months. For the first time since April, 2013, all six major industries held an optimistic outlook about the next six months' economy.

As businesses begin to stock up on inventory, it is a sign that firms are confident about future demand, said Steve Lai (賴樹鑫), the executive director of the Supply Management Institute in Taiwan .

The US Leads the Way

Wu said that the global economy is expected to perform better in 2014, with the U.S. leading the economic recovery. The U.S.'s job market, housing index and consumer confidence all look promising in the mid and long term, Wu said.

While the U.S.'s PMI underperformed, the indexes rose in Japan, South Korea and Europe. Wu pointed out that weather conditions were the major factor that contributed to the U.S.'s worse-than-expected performance in the manufacturing sector. Wu said that he holds a “cautiously optimistic” view for 2014's economy.

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