Taiwan’s manufacturing sector remained in contraction mode in August for the second consecutive month, with the purchasing managers’ index (PMI) falling to 47.20 points, due mainly to a global economic slowdown amid weak demand, the Chung-Hua Institution for Economic Research (CIER) said Thursday.
Taiwan’s seasonally adjusted PMI, a key gauge of the health of its manufacturing sector, fell 0.6 points in August from a month earlier to 47.20, the lowest in more than two years, CIER data showed.
Among the major factors in the August PMI, the sub-index for the business outlook over the next six months fell 1.8 points to 28.3, the lowest since May 2020.
In addition, the six major industries in the PMI were all in contraction mode in August, said CIER, one of the leading think tanks in Taiwan.
CIER President Chang Chuang-chang (???) said at a press conference that local manufacturers are conservative about the industry’s outlook, which can be attributed to several factors, including weak end-market demand due to the poor economic prospects for the world’s major economies in the second half of this year and in 2023.
This has led to an inventory build-up, and as a result, local manufacturers, particularly those in the electronics industry, will have to adopt stock reduction strategies in the second half of this year, Chang said.
In addition, geopolitical risks are contributing to the uncertainties in the global economic outlook, he said, citing the war between Russia and Ukraine as the main factor.
Amid those uncertainties, most economic institutions see some possibility of a recession in the United States, one of Taiwan’s major export markets, Chang said, adding that China’s COVID-19 restrictions and power rationing will also affect Taiwan’s exports.
The latest data released by the Ministry of Economic Affairs showed an unexpected drop in Taiwan exports in July from the previous month, which was a warning sign, Chang said.
“The negative effects will gradually emerge in the second half of the year, especially in the fourth quarter,” he said.
Meanwhile, the non-manufacturing index (NMI), which covers service sector activity, also fell in August, dropping 2.9 points from a month earlier to 53.8, but it remained in expansion 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.
Source: Focus Taiwan News Channel