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Taiwan PMI April 2018

Taiwan: Manufacturing PMI falls to six-month low on slowing export sales

The pace of expansion in the manufacturing sector again slowed in April. The manufacturing Purchasing Managers’ Index (PMI), reported by Nikkei and IHS Markit, fell from 55.3 in March to 54.8 in April, a six-month low. 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 almost two years, and above its long-term trend level.

The weaker reading in April came largely on the back of lower growth in output and new orders, which both fell to six-month lows. Slowing momentum from external demand seems to have led this decline, with growth in new export orders falling to a 19-month low, despite remaining robust. This in turn led to a softer increase in purchasing activity, which slowed to levels not seen since July 2017, while inventories of both raw materials and finished products also expanded at a more modest pace than in previous months.

Nevertheless, signs of strain in manufacturers’ supply chains were still apparent, with average delivery time of inputs continuing to lengthen significantly in the month as stock shortages kept plaguing vendors. On the price front, both input and output inflation moderated to eight-month lows but remained steep, a further sign of full capacity utilization in the manufacturing sector. Despite a slower expansion of activity, backlogs of work again rose sharply in April, and payroll growth accelerated to a three-month high.

Overall, operating conditions remained largely positive, but forward-looking business confidence dipped to a six-month low amid a moderation in external demand at the beginning of the second quarter. Indeed, according to Annabel Fiddes, Principal Economist at IHS Markit: “After a solid performance over the opening quarter of the year, PMI data indicated that the upturn in Taiwan’s manufacturing sector lost a little more steam in April. […] Softer demand conditions, particularly in international markets, and a weaker increase in purchasing activity therefore hint that growth of the sector may slow further in the coming months”.

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