Taiwan PMI May 2018

Taiwan

Taiwan: Manufacturing PMI recedes to 11-month low in May on weak new orders growth

June 1, 2018

The Taiwanese manufacturing sector again lost some momentum in May. The manufacturing Purchasing Managers’ Index (PMI), reported by Nikkei and IHS Markit, fell from 54.8 in April to 53.4 in May, an 11-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 close to two years, and above its long-term trend level.

May’s result was largely driven by a sharp slowdown in growth in new orders—which reached a 22-month low due to weakening demand in both domestic and export markets—and new export orders, which also reached an almost two-year low. As a result, output growth fell to a seven-month low, employment growth softened, and businesses’ forward-looking confidence for output in the year ahead diminished to the lowest point since last July.

Despite softer demand pressures, signs of strain in manufacturers’ supply chains remained apparent in May. Although purchasing activity softened in the month, average input lead times continued to lengthen due to remaining stock shortages among suppliers. Nevertheless, manufacturers reported increases in their inventory levels for both purchased items and finished goods. Input inflation remained sharp, but eased to a nine-month low, while manufacturers’ selling prices increased at the second-fastest pace in more than seven years.

Commenting on the moderation in global demand conditions, Annabel Fiddes, Principal Economist at IHS Markit, noted:

“The disappointing trend in exports could add to concerns that the performance of the sector may be hindered by signs of cooling global demand. […] Overall, the data show that the manufacturing sector is on course to expand at a weaker pace than seen in the opening quarter of the year, to hint that GDP growth could edge down again in Q2.”

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 May 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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