Taiwan PMI February 2018

Taiwan

Taiwan: Manufacturing PMI recedes from near seven-year high in February

March 1, 2018

Manufacturing activity expanded at a sharp, yet softening, pace in February. The manufacturing Purchasing Managers’ Index (PMI), reported by Nikkei and IHS Markit, fell from a nearly seven-year high of 56.9 in January to 56.0 in February. Despite the drop, the PMI remains significantly 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.

The slight worsening of operating conditions in February was mainly due to slower expansion of new business and production, as well as smaller increases in employment numbers compared to January. Nevertheless, some positive signs also emerged from this month’s PMI release. Notably, the pace of new order growth and new export sales growth remained decidedly sharp in February, propelling backlogs of work to increase at the fastest rate in almost eight years and leading purchasing activity to also expand at a near eight-year high .

This overheating of manufacturers’ purchasing activity continued to strain their supply chains, similarly to what was observed in the prior month. Due to persistent stock shortages amid increased input demand, supplier lead times again increased, at a similarly sharp rate compared to January, while input price inflation in February was among the highest reported in seven years. Overall, the positive dynamics and strong growth outlook, buttressed by rising global demand, improved business sentiment to a ten-month high.

Annabel Fiddes, Principal Economist at IHS Markit, noted that, “With new orders still rising to a greater extent than output, and backlogs of work accumulating at the fastest pace for nearly eight years, the data suggest that the sector will continue to ramp up production in the coming months.”

FocusEconomics Consensus Forecast panelists expect fixed investment to expand 2.5% this year, which is unchanged from last month’s forecast. For 2019, participants also expect fixed investment to increase 2.5%.


Author:, Economist

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Taiwan PMI February 2018

Note: Nikkei Taiwan Purchasing Managers’ Index (PMI). A reading above 50 indicates an expansion in business activity while a value below 50 points to a contraction.
Source: Nikkei and IHS Markit.


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