Taiwan: Manufacturing PMI edges down again in April
May 2, 2019
Operating conditions in the Taiwanese manufacturing sector continued to deteriorate in April for the seventh month running, and at a slightly faster pace than in March. The manufacturing Purchasing Managers’ Index (PMI), reported by Nikkei and IHS Markit, fell from 49.0 in March to 48.2 in April, remaining below the 50-point threshold that separates expansion from contraction in the manufacturing sector.
The worsening of operating conditions came on the back of weaker demand, with both output and new orders falling at a steeper pace than in March. On the flipside, export demand—while still in decline—registered the softest contraction in new orders in eight months, a positive sign given the critical importance of Taiwan’s export-oriented industries. Meanwhile, firms slashed jobs in April, contrasting the slight increase in staffing levels registered in March. Due to lower output, backlogs of work also rose for the first time since October, though this was only marginal.
On the supply side, purchasing activity slightly declined, while lower pressure on the supply chain also led vendors’ delivery performance to improve for the second month running. Firms’ input inventories fell at a quicker rate, while, conversely, stocks of finished goods declined at the slowest pace in five months. Amid this subdued level of activity, input costs declined somewhat, and survey respondents largely indicated reducing their selling prices in order to shore up demand.
Ending on a positive note, manufacturers’ sentiment regarding the production outlook in the year ahead reached a four-month high. Nevertheless, short-term prospects remain clouded by an increasingly bleak external environment. Notably, the recent flare-up of trade tensions between the U.S. and China could further worsen Taiwan’s external sector outlook. Tech products, which have so far been largely spared by the trade war, could indeed become the target of new tariffs if tensions between the two economic giants escalate.
Author: Joffrey Simonet, Economist