Taiwan: Manufacturing activity expands picks up in August
September 1, 2017
Growth momentum in Taiwan’s manufacturing sector continued to improve in August, bolstered by healthy exports. The Manufacturing Purchasing Managers’ Index (PMI), reported by Nikkei and IHS Markit, rose for a third consecutive month, from 53.6 in July to 54.3 in August, marking the best reading in five months. The PMI is now further above the 50-point threshold which separates expansion from contraction in the manufacturing sector.
The August report showcased the resilient health of the manufacturing sector, which seems to have recovered from a small trough in Q2. Output growth came in at a faster clip compared to the previous month, expanding at the quickest pace since March. Survey respondents widely linked higher output to increased amounts of new work, which was brought about by healthy growth in new exports orders. This continued to add pressure to firms’ output capacity, prompting firms to intensify their hiring in August. This, however, was not enough to contain new outstanding work, with backlogs of work accumulating at the fastest clip in the year to date.
Regarding prices, input inflation accelerated markedly in August from the previous month as shortages of supplies were widely reported, driving up prices for raw materials. On this topic, Annabel Fiddes, Principal Economist at IHS Markit, comments:
“The sector continues to be held back by shortages at suppliers, which have led to another sharp increase in delivery times. Furthermore, a combination of supply shortages and rising demand for inputs drove the rate of cost inflation higher, with August showing the quickest increase in average input costs for four months. A lack of resources is also driving a sharp increase in backlogs of work, and suggests that shortages are weighing on overall growth of production.”
Author: David Ampudia, Economist