The official manufacturing purchasing managers’ index (PMI) last month gained 7 points to 48.3, staying in the contraction zone for the fourth straight month, but a recovery is around the corner, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
“The PMI data turned out better than expected for the month of June when business usually stalls due to the low season,” CIER president Yeh Chun-hsien (葉俊顯) told a news conference in Taipei.
Yeh attributed the upturn to rush orders and a much-anticipated beginning of a recovery.
Photo: Hsu Tzu-ling, Taipei Times
PMI data aim to gauge the health of the manufacturing industry, with values of 50 and larger indicating expansion and points below the threshold suggesting contraction.
The critical subindex of new business last month gained 18.4 points from the previous month to 52.7, while the industrial output gauge rose 14 points to 50.9, both bouncing back to the growth zone, the survey by the Taipei-based institute found.
However, the subindices for employment, supplier deliveries and inventories remained in contraction, although they moved slightly higher from a month earlier by 0.8, 0.6 and 1.4 points respectively, to 47.2, 44.1 and 46.7.
Among the six major industries in the manufacturing sector, only the subindex for the chemical and biotech industry moved lower.
The other five subindices for the electronics/optoelectronics, food and textiles, basic raw materials, transportation equipment, and electrical equipment and machinery industries moved higher, CIER said.
A biannual survey lent support to a positive forecast, as the reading on business outlook for the second half of this year was 62.9, while profitability expectations was 55, CIER said.
The 12-month business prospect added 18.8 points to 64.
National Development Council Deputy Minister Kao Shien-quey (高仙桂) said that the economy was in the process of bottom-building in the first half of this year, but circumstances improved last month and the economy might be emerging from the woods.
However, uncertainty remains as the global economy needs more time to digest the negative effects of drastic interest rate hikes by major central banks, Kao said, adding that lingering geopolitical tensions and labor shortages could weigh on economic development at home and abroad.
Similarly, Yeh said that Taiwanese firms should remain cautious about purchasing activity and pricing strategy in light of limited order visibility, despite rush orders.
“Firms had better stay alert, as operating cost hikes might grow into a structural phenomenon,” the economist said.
Companies focused on domestic demand fared better, with the nonmanufacturing index registering 54.6, up 2.6 points from a month earlier, and marking the eighth straight month of expansion, CIER said.
Meanwhile, service providers continued to benefit from pent-up demand in the post-COVID-19-pandemic era, Yeh said.
The four major factors of the service sector improved last month, with the subindices for business activity, new orders, employment and supplier deliveries rising 1.6, 2.9, 2.4 and 3.1 points from May respectively, to 54.8, 54.8, 55.9 and 52.7, CIER said.
Confidence is strong among hotels and restaurants, educational facilities, retailers, and shipping and warehousing service providers, it said.
Additional reporting by CNA
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