Taiwan PMI February 2019


Taiwan: PMI dips again in February as export sales fall to seven-year low

March 4, 2019

Operating conditions in the Taiwanese manufacturing sector deteriorated further in February, confirming feeble economic momentum so far in the first quarter amid nosediving external demand. The manufacturing Purchasing Managers’ Index (PMI), reported by Nikkei and IHS Markit, fell from 47.5 points in January to 46.3 in February, its lowest level in three-and-a-half years. The index thus remained below the 50-point threshold that separates expansion from contraction in the manufacturing sector for the fifth month running.

As has been the case in recent months, deteriorating operating conditions in February came on the back of a sharper decline in new orders, with weaker demand in key export markets—primarily mainland China, Hong Kong, and the ASEAN region—causing export sales to fall at the fastest rate in over seven years. Moreover, production also declined at the quickest clip in over three years. Due to reduced new business, firms were able to clear their backlogs of work at a faster clip, while slightly reducing their staffing levels.

On the purchasing front, lower business activity weighed heavily on input buying, as firms prioritized reducing their existing stocks to keep costs down and avoid excessive inventory levels amid falling demand. Thus, both stocks of inputs and finished products fell at the sharpest rate in over three years in the month. As for prices, input costs rose slightly, but output prices were slashed as companies competed on pricing in order to gain new business.

Lastly, manufacturers’ sentiment towards the year ahead fell into pessimistic territory due to ongoing concerns about the U.S.-China trade war and a deteriorating global growth outlook.

Commenting on February’s reading, Annabel Fides, principal economist at IHS Markit, noted that:

“Expectations that client demand, particularly from overseas, will remain subdued led to sharp reductions in purchasing activity and inventories, indicating that firms could cut production further in the months ahead.”

The government expects GDP to expand 2.3% in 2019. FocusEconomics Consensus Forecast panelists project GDP will grow 2.2% in 2019, which is unchanged from last month’s forecast. For 2020, the panel estimates that economic activity will increase 2.0%. FocusEconomics Consensus Forecast panelists expect fixed investment to expand 2.6% this year, which is down 0.1 percentage points from last month’s forecast. For 2020, participants expect fixed investment to increase 1.7%.

Author:, Economist

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Taiwan PMI Chart

Taiwan PMI February 2019 1

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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