The HSBC Taiwan Manufacturing headline Purchasing Managers’ Index posted 53.8 in June, falling from May’s reading of 57.4 and a third consecutive decline. Nonetheless, the latest improvement in business conditions was the 15th in successive months.
New orders received by manufacturers in Taiwan increased solidly during June. However, the rate of new business growth slowed for a fourth successive month from the recent high recorded in February, and was the lowest since April 2009. Anecdotal evidence suggested that, while demand continued to recover both at home and overseas, the rate of improvement has slowed markedly over the past few months. The latest expansion in new export orders was the weakest in the current 14-month period of growth.
Overall growth in new business supported a rise in output in the Taiwan manufacturing sector. However, in line with weaker new order gains, the rate at which production increased was slower and below the long-run average for the series.
Backlogs of work rose for a 15th successive month in June. Panelists commented that delays in shipments of materials had led to the further accumulation of outstanding business. Finished goods stocks fell for a second successive month, as manufacturers utilized inventories to partially fulfill new order obligations.
Reflective of sustained increases in new orders and output, employment within the Taiwan manufacturing sector increased for a 12th successive month. Despite the marked easing in new order growth, the rate at which staffing levels rose was broadly unchanged since May.
Input prices faced by manufacturers in Taiwan increased substantially during June. However, the rate of input cost inflation slowed since May, with anecdotal evidence suggesting that the prices of some metals had actually declined. Output prices fell marginally, with panelists noting competition for new business and lower input costs.
Despite the sustained rise in input costs, purchasing activity increased further in June. However, in line with a slower rise in output, growth in input buying eased since May. Delivery times continued to lengthen, reflecting both higher purchasing activity and shortages of certain materials.
Commenting on the Taiwan Manufacturing PMI survey, Frederic Neumann, co-head of Asian economic research at HSBC, said: “After surging output over the first five months of the year, the growth of Taiwan's economy is starting to cool. This, however, does not necessarily signal a hard landing. New exports orders are still growing at a decent pace and job growth was broadly unchanged since May. Meanwhile, price pressures are easing again, if from an elevated pace, suggesting that recent rate hikes are aimed more at bubbly property prices rather than inflation risks.”
