The manufacturing purchasing managers’ index (PMI) rose to 51.8 last month from 50.8 the previous month, as firms reported further order and output growth amid improving demand, a survey released by IHS Markit showed yesterday.
The rate of improvement, albeit modest, was the best since August 2018 as the operating conditions facing local manufacturers brightened.
“Latest PMI data showed Taiwan’s manufacturing sectors saw continued improvement in growth momentum at the start of this year amid a US-China rapprochement,” IHS Markit economist Annabel Fiddes said in a statement.
Local manufacturers posted the strongest increases in output and new orders in 17 months, she said.
The PMI aims to gauge the health of the manufacturing industry, with results above 50 indicating expansion and scores below the threshold suggestion contraction.
Better demand at home and overseas accounted for the upturn, Fiddes said.
New export orders expanded for the first time since August 2018, while inventories, both purchases and finished goods, posted growth for the first time since October 2018, the survey showed.
Business confidence rose to its highest level in close to two years, with some firms attributing the upturn in sentiment to an easing of US-China trade tensions, as well as the launch of new electronic gadgets.
At the same time, planned production line expansions contributed to a further increase in payrolls, although the job-creation rate eased compared with December last year, the survey showed.
Despite higher staffing levels, backlogs rose for the second consecutive month, although the rate of accumulation was mild.
Average cost burdens continued to rise, with input price inflation accelerating at a solid pace, the survey showed.
Higher raw material costs drove up operating expenses, but companies were continuing to cut prices after negotiations with clients, respondents said, adding that greater discounts would squeeze profit margins.
In general, Taiwanese manufacturers expressed a stronger degree of optimism on the 12-month business outlook, IHS Markit said.
Firmer client demand and stronger confidence underpinned renewed upturns in inventories of purchases and finished goods, while a brighter outlook and stronger buying activity suggested that production and sales would continue to rise in the months ahead, the firm said.
However, the continued decline in output prices remained a concern, IHS Markit said, adding that companies are cutting selling prices despite growing operational expenses, which is unfavorable for the profit margins.
Firms would regain the power to remedy the situation if improved demand proves to be long-term, Fiddes said.
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