The S&P Global Taiwan Manufacturing Purchasing Managers’ Index (PMI) last month weakened slightly to 48.6 from 48.8 in January, indicating a mild deterioration in operating conditions, but companies were positive about their 12-month business outlook.
The PMI has remained in contraction mode for 21 months in a row, but is moving close to the neutral point. PMI values of lower than 50 indicate contraction and points above the threshold suggest expansion.
Companies attributed the downturn in output to soft demand, with new orders shrinking for 22 straight months, S&P Global said.
Photo: Reuters
Demand from customers at home and abroad was lackluster, with new export business falling at a solid rate, it said.
As a result, purchasing activity and inventories continued to drop.
However, the rate of decline was small compared with last year and companies expressed strong confidence toward production in the next 12 months, which drove a modest uptick in employment, it said.
“The optimistic sentiment about future output is encouraging, as companies look to expand operations on expectations of better global demand,” said Annabel Fiddes, economics associate director at S&P Global Market Intelligence, adding that such expectations led firms to raise headcounts for the second consecutive month.
Taiwan’s manufacturers largely indicated that production would rise in the next few quarters, citing forecasts of more robust global economic conditions, increased client spending and restocking activity, she said.
In addition, companies displayed the mildest retreat in stocks of inputs and finished items for more than a year and a half, further signs that the inventory destocking cycle was fading, Fiddes said.
Prices data pointed to an easing of cost pressures, with input price inflation tapering to a six-month low, S&P Global said.
Average input costs climbed at the softest rate since August last year and the small increase in costs came from higher raw material prices, notably metals, and in some cases shipping rate hikes, it said.
Delivery time lengthened marginally as firms moved shipping schedules ahead to meet rerouting needs, it said.
Favorable cost trends allowed firms to cut selling prices in a bid to attract new business, it said.
“While firms are optimistic about their business prospects, we still need to see an overall improvement in client spending to support the industry’s recovery,” Fiddes said.
At the same time, supply chains will have to carefully monitor and see how the Red Sea shipping disruptions might impact their costs and sales, the economist said.
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