Taiwan’s official manufacturing purchasing managers’ index (PMI) last month climbed to a new high of 65.1 as business heated up across sectors, but soaring shipping and raw material prices threaten to erode corporate profitability, the Chunghua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
“Local firms generally reported strong orders, but continued to complain about container shortages, which are delaying shipments,” CIER researcher Chen Shin-hui (陳馨蕙) said on behalf of the research team.
Meanwhile, raw material price hikes are adding to operational costs, she said.
PMI data aim to measure the health of the manufacturing industry, with values larger than 50 indicating business expansion and those lower than that threshold suggesting contraction.
The sub-index on new business orders was 68.2, comfortably above the expansion mark, although slowing from 69.4 one month earlier, the Taipei-based institute said.
Bike buyers are having to wait for more than a year for delivery, while order visibility is clear through December for semiconductors, CIER vice president Wang Jiann-chyuan (王健全) said.
Raw material and shipping costs also rose to historical highs, which could squeeze profits for companies that depend on providing intermediate goods, Chen said.
The sub-index on raw material prices last month rose 3 points to 85.8, with local firms mulling whether to pass cost burdens to customers to protect their bottom line, she said.
The reading on delivery times added 8.2 points to 73.3 as companies reported difficulty securing containers to ship products, she added.
A local company had to lease a ship for three years to ensure the smooth delivery of goods, and tackle container shortages and weekly shipping charge hikes, said Steve Lai (賴樹鑫), executive director at Supply Management Institute in Taiwan (中華採購與供應管理協會).
“The case sheds light on how serious the container shortage is,” Lai said, urging firms to strengthen communications and abandon the practice of overbooking, which is pushing up operating costs and augmenting supply constraints.
A major chip testing and packaging company has raised selling prices by 30 percent to discourage reckless orders, as customers would rather risk double-booking than experience inventory shortages.
Fears of supply chain disruptions caused by recurring lockdowns amid the COVID-19 pandemic have prompted companies to raise supply security levels.
The non-manufacturing index (NMI) was 55, staying in the growth zone for the eighth consecutive month, CIER said.
Chen said the NMI might see corrections this month after some hotels and restaurants reported cancelations of bookings following a COVID-19 cluster infection at Taoyuan General Hospital last month.
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