Taiwan manufacturing grows for first time in four months

The HSBC Taiwan Purchasing Managers’ Index (PMI) – a composite indicator designed to provide a single-figure snapshot of the health of the country's manufacturing sector – posted 51.7 in November, rising from October’s reading of 48.6. The latest reading signaled a strengthening of the manufacturing sector in Taiwan, but the pace of expansion remained below the long-run series average.

November data indicated that incoming new business increased in November, and for the first time in five months. New orders received from overseas markets also expanded during the month, with panelists commenting that ongoing improvements in global economic conditions had boosted demand, particularly in Europe. Nonetheless, growth of both new export orders and overall new business remained weak in the context of historical data.

Output increased marginally in November, reflective of the rise in workloads. However, an increase in outstanding business indicated that production capacity had been constrained. Whilst the rise in new orders contributed to this, some panelists also noted that certain materials were in short supply, which delayed production.

Manufacturers in Taiwan reported a rise in staffing levels during the month. Anecdotal evidence suggested that those companies adding to headcounts were aiming to increase production capacity. Nonetheless, the latest rise in employment was marginally weaker than the long-run average for the series.

Suppliers’ delivery times were reported to have lengthened again during November. Purchasing activity continued to fall, but at the slowest rate in four months.

November data signaled a considerable rise in input prices faced by manufacturers in Taiwan. Higher raw material prices, the short supply of certain items, and unfavorable exchange rate fluctuations all contributed to the latest increase in costs. Input cost inflation has been recorded for eighteen consecutive months, with the latest increase one of the strongest in the series history. Output prices also rose, reflective of the increase in costs. The rise in charges was notably sharp in the context of historical data, but was prevented from increasing further due to strong competition for new business.

Commenting on the Taiwan Manufacturing PMI survey, Donna Kwok, economist at HSBC in Asia, said: “November’s PMI result lays to rest fears that the rebound in the performance of Taiwan’s manufacturing sector post the global financial crisis is about to plummet back into deep negative territory. Manufacturing is finding its feet again after a prolonged summer lull in Western demand. Although the outlook’s far from clear, the interim support this lends the island’s labor market recovery will be critical for keeping its domestic demand recovery on track.”