Manufacturing activity remained in expansion mode for the 24th consecutive month in June, but uncertainty over the global economy is likely to affect the sector down the road, the Chung-Hua Institution for Economic Research (CIER) said Friday.
Data compiled by CIER, one of the leading think tanks in Taiwan, showed that the seasonally adjusted Purchasing Managers’ Index (PMI) for June rose slightly from a month earlier by 0.1 points to 53.6 largely due to an increase in the sub-index for new orders.
The non-manufacturing index (NMI), which covers service sector activity, also moved higher by 4.6 from a month earlier to 49.7 in June, but the index stayed in contraction mode for the second consecutive month, according to CIER.
For the PMI and NMI, readings above 50 indicate expansion, while those below 50 represent contraction.
Speaking at an online news conference, CIER President Chang Chuang-chang (???) said that after China eased lockdowns against COVID-19 last month, production among manufacturers in Taiwan showed signs of recovering.
In addition, production by local manufacturers also recovered following the eased impact from domestically transmitted COVID-19 cases which peaked in May, Chang said.
As a result, the sub-index on production for June rose 3.7 percent from a month earlier to reach 51.6 and return to expansion.
Among the four other factors in the June PMI, the sub-index for new orders rose 1.8 from a month earlier to 47.4 in June but remained in contraction mode, while the sub-indexes for employment and inventories rose 0.9 each from a month earlier to 55.1 and 59.1, respectively.
Bucking the upturn, the sub-index for supplier deliveries fell 6.9 from a month earlier to 54.8 in June.
Chang said that orders placed in June were largely deferred orders which had been anticipated, so the increase in the sub-index does not indicate the manufacturing sector received large additional orders.
As for the business outlook over the next six months, the sub-index fell 6.9 from a month earlier to 37.1, the lowest level since June 2020 when the figure stood at 33.7. It was the second consecutive month the sub-index has contracted, according to CIER.
In terms of the six major industries in the June PMI, only the sub-indexes for food/textile and transportation equipment industries moved higher from a month earlier, CIER said.
The sub-indexes for chemicals/biotech, electronics/optoelectronics, basic raw materials, and electrical equipment industries moved lower from a month earlier in June, CIER added.
Citing a survey, Chang said with the exception of some food suppliers and select biotech firms, many in these major industries expressed concern over weakening demand after seeing their orders fall in June.
The global economy has showed signs of weakening, which have impacted demand at a time when the major central banks, in particular the United States Federal Reserve, have kicked off a rate hike cycle to fight inflation, Chang added.
As a result, despite a small recovery in the June PMI, the local manufacturing sector still faces uncertainty in the wake of such unfavorable circumstances, Chang said.
Commenting on the recovering NMI, Chang said with the growth in new indigenous COVID-19 cases moderating, consumers appear more willing to spend and travel.
Among the four factors in the June NMI, the sub-indexes for business activity, new orders, and employment moved higher by 10.2, 8.8, and 1.5, respectively, to 48.0, 46.3 and 50.8 in June, but the sub-index for supplier deliveries moved lower by 1.9 from a month earlier to 53.8.
Source: Focus Taiwan News Channel