The official manufacturing purchasing managers’ index (PMI) posted 59.3 this month, above the expansion threshold for 18 straight months, but increasing costs might weaken companies’ profitability next year, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
The Taipei-based think tank said that its assessment is based on a month-long survey of local firms.
PMI readings aim to gauge the health of the manufacturing industry, with scores above 50 indicating expansion and scores below 50 suggesting a contraction.
Photo: CNA
The growth extended across all manufacturing sectors, as local companies benefited from the recovery of the global economy, the survey showed.
“Companies generally expect business to go uphill in the next six months, compared with the second half of this year, but voiced concern that rising labor and raw material costs would pressure profit margins,” CIER president Chang Chuang-chang (張傳章) said.
Raw material price upticks not only reflect demand pickup, but are due in part to supply chain bottlenecks, Chang said.
Lockdowns and other measures to contain the spread of COVID-19 affected delivery schedules, and pushed up shipping and commodity costs, he said.
The PMI’s sub-index on raw material prices remained high at 73.9, while the measure on delivery times stretched to 65, Chang said, adding that the predicament might persist through the first half of next year.
Some manufacturers can pass cost hikes to customers, while less competitive ones opt to absorb the burden to retain customers and shoulder thin margins, he said.
The survey showed lackluster profit expectations, at 47.4 for the first half of next year, even though the six-month outlook reading held solid at 57.9, unchanged from one month earlier, Chang said.
The Omicron variant of SARS-CoV-2 raises global uncertainty over when supply chain disruptions might end, Chang said, adding that inflation would remain a threat unless demand weakens due to other downside risks, including interventions by global central banks.
The sub-index on new business stood at a robust 59.7, while the measure on industrial production remained at a high level of 60.2, the survey showed.
Business improvement extended to non-manufacturing sectors, with the dedicated index at 58.6, rising for six months in a row, it showed.
All sectors took part in the recovery and growth is expected to continue in the coming six months, Chang said.
Private consumption might replace exports as the main growth driver for Taiwan’s economy next year, as a high comparison base would weigh on export increases, he said.
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