Taiwan: Manufacturing PMI hits seven-month low in May
June 1, 2016
The manufacturing Purchasing Managers’ Index (PMI), elaborated by Nikkei and Markit, dropped from 49.7 in April to 48.5 in May. May’s reading marked the third time this year that the PMI dropped below the 50-point threshold that separates expansion and contraction in the manufacturing industry and is the weakest reading since October.
According to Nikkei, May’s reading reflects a sharper drop in output and new orders. Weak client demand from domestic and international markets resulted in a drop in total new business. Weak demand prompted firms to cut back their inventory holdings and production schedules for the second consecutive month. As output dropped, manufacturing firms scaled back input buying and implemented tighter inventory controls. Regarding price development, input costs rose for the third consecutive month on the back of higher prices for raw materials such as oil and steel while output costs dropped.
Markit analysts added that, “Taiwanese manufacturers reported a sharper deterioration in overall business conditions in May, with output and new orders both contracting at faster rates than in April. Survey respondents indicated that customer demand declined across both domestic and international markets as the global economic outlook remains murky. Unfortunately, the data suggest that companies expect client demand to remain weak in the coming months, as highlighted by marked reductions in inventories of both inputs and finished items. The downturn in new orders also meant firms continued to offer discounts to attract new work, despite a stronger rise in cost burdens, adding a further squeeze on profit margins.”