Taiwan: Manufacturing PMI dips in March but remains decidedly in expansion
April 2, 2018
The pace of expansion in the manufacturing sector moderated in March. The manufacturing Purchasing Managers’ Index (PMI), reported by Nikkei and IHS Markit, fell from 56.0 in February to 55.3 in March. Despite the drop, the PMI remained above the 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has now been for over a year and a half, and above its long-term trend level.
The lower headline reading in March, which marked a five-month low, resulted largely from a softer rise in new orders and employment, with payroll numbers expanding at the slowest rate in nine months. On the other hand, growth in output accelerated modestly. With new order growth still robust, backlogs of work continued increasing, and purchasing activity remained sharp, although their respective rates of growth softened from the near eight-year highs reached in February.
Manufacturers’ supply chains, meanwhile, continued showing signs of strain, with average delivery times deteriorating at the fastest rate in seven years amid stock shortages among suppliers. This added pressure on the supply chain, which translated into further cost inflation: Input costs rose at the fastest pace in fourteen months in March, driven by raw materials, while factory gate prices increased at a slower rate, signaling margin compression across the manufacturing sector.
Overall, and although business confidence dipped to a five-month low, operating conditions remained decidedly positive. According to Annabel Fiddes, Principal Economist at IHS Markit: “[The] average PMI reading over the opening three months of the year signaled the strongest quarterly performance since Q1 2011. Rising client demand, particularly from export markets, remains a key driver of growth. However, latest data show that demand conditions, while still robust, show signs of softening slightly.”
Author: Joffrey Simonet, Economist