Taiwan: PMI falls to 39-months low in December, confirming weak Q4 performance
January 2, 2019
Operating conditions in the Taiwanese manufacturing sector deteriorated for the third consecutive month in December, indicating significantly weaker momentum in the fourth quarter. The manufacturing Purchasing Managers’ Index (PMI), reported by Nikkei and IHS Markit, declined from 48.4 in November to 47.7 in December. The index thus remained below the 50-point threshold that separates expansion from contraction in the manufacturing sector.
The deterioration in December came largely on the back of lower new orders, both foreign and domestic, with both falling to a39-month low in the month. Some respondents notably linked weaker demand to the U.S.-China trade war. This consequently led firms to continue cutting output, but also to shave staffing levels for the first time in over five-and-a-half years. In light of softer demand, backlogs of work decreased again in December—after falling for the first time in over two years in November.
Looking at supply indicators, purchasing activity also declined at the steepest rate in over three years, while the decline in input inventories that began in November continued at a sharper rate in December. Finished goods inventories also decreased in December. Meanwhile, supplier delivery times lengthened amid ongoing input shortages. On the price front, firms reported lower input costs for the first time in almost three years, while simultaneously decreasing their selling prices for the first time in a year-and-a-half on weak demand.
Author: Joffrey Simonet, Economist