The official manufacturing purchasing managers’ index (PMI) last month shed 4.5 points to 42.8, dragged by conspicuous declines in new business orders and industrial production, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
“Taiwanese manufacturers turned conservative after major chipmakers last month gave weak earnings guidances for this quarter and beyond, while global economic uncertainty shows no signs of easing,” CIER president Yeh Chun-hsien (葉俊顯) told a news conference in Taipei.
Yeh specifically referred to Taiwan Semiconductor Manufacturing Co (台積電), the world’s largest advanced chipmaker, which said on April 20 that inventory adjustments were worse and taking longer than expected due to poor demand for personal computers and smartphones.
Photo: Hsu Tzu-ling, Taipei Times
At the same time, the benefits of China’s reopening are not yet evident, strikes in Europe could slow the pace of recovery and the US Federal Reserve might raise interest rates again this week to tame inflation — all of which would be unfavorable for Taiwan exports, Yeh said.
“The backdrop lends support to a frugal approach in dealing with purchasing activity,” Yeh said.
PMI data aim to measure the health of the manufacturing industry with values of 50 or higher suggesting expansion and scores lower than the threshold indicating contraction.
Most sectors reported a downturn in business last month, except for suppliers of food, textile and raw material products, CIER said, citing a monthly survey of local firms.
The critical subindex on new business orders dropped 3.9 points to 40.6, while the reading for industrial production tumbled 13.5 points to 38.5, as poor sales prompted firms to cut capacity and staff numbers to save on operating costs, the Taipei-based think tank said.
Electronics makers held relatively firm, but vendors of electrical and machinery equipment, and transportation tools fell into contraction, CIER said.
The inventory subindex declined 4 points to 45.9, while the reading for clients’ inventory dropped 2.1 points to 44.9, as firms would rather tighten their belts than replenish inventory, it said.
Tepid demand helped ease raw material prices, with the price measure retreating 4.5 points to 52, CIER said.
Firms in almost all of the manufacturing sectors held a negative view regarding their business prospects, explaining why the six-month outlook dropped 1.3 points to 44.9, it said.
Purchasing activity at service providers gained further momentum, tipping the nonmanufacturing index up by 2.6 points to 55.8, although wholesale operators bucked the trend, the think tank said.
Nonmanufacturing businesses are divided about their business outlook: Hospitality operators, retailers and transportation service providers are upbeat, but property brokers and financial companies expect a soft patch ahead, CIER said.
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