Taiwan: Manufacturing activity reaches over six-year high in December
January 2, 2018
Manufacturing activity expanded at the fastest pace in over six years once again in December. The manufacturing Purchasing Managers’ Index (PMI), reported by Nikkei and IHS Markit, rose from 56.3 in November to 56.6 in December, the highest figure since April 2011. As a result, the PMI sits further above the 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has now been for a year and a half.
The improvement in operating conditions was mainly supported by a sharp and broad-based increase in new orders, including export sales. This drove output growth to reach a nine-month high, and in turn, prompted Taiwanese manufacturers to increase payrolls at the fastest rate in a year. Higher output volumes also led firms to expand their purchasing activity, though at a more moderate pace than in November. Despite higher workforce numbers, backlogs of work continued accumulating at a robust pace. Forecasts indicating a continued rise in client demand further strengthened business confidence, driving it to an eight-month high.
Strong demand for inputs strained supply chains, which led to a marked increase in average delivery times as some vendors experienced inventory shortages. High demand also pushed up average input costs at a faster rate, the sharpest acceleration since February. Higher oil and steel prices, in particular, fed the overall increase in costs, and companies, in turn, passed these higher costs on to their customers.
Author: Joffrey Simonet, Economist