Taiwan’s manufacturing sector fell to contraction mode in July, ending a 24-month expansion streak as the sub-indexes on new orders and production in the Purchasing Managers’ Index (PMI) moved sharply lower last month, amid weaker global demand, the Chung-Hua Institution for Economic Research (CIER) said Monday.
Data compiled by CIER, one of the leading think tanks in Taiwan, showed the seasonally adjusted July PMI stood at 47.8 points, down 5.8 from a month earlier, marking the steepest month-on-month fall since the tally began in July 2012.
The non-manufacturing index (NMI), which covers service sector activity, however, bucked the downturn, rising 7.0 points from a month earlier to 56.7 in July, according to CIER.
For the PMI and NMI, readings above 50 indicate expansion, while those below 50 represent contraction.
Speaking with reporters, CIER President Chang Chuang-chang (???) said the contraction in the local manufacturing activity came as demand weakened, which led to inventory build-up, while a fall in prices of raw materials, such as metal and petrochemical items, created more uncertainty for the manufacturing sector.
Sub-indexes
Among the five major factors in the July PMI, the sub-index on new orders, which reflected future business prospects, fell sharply by 10.8 points from a month earlier to 36.6 in contraction mode, the lowest level since May 2020, when the sub-index stood at 35.9, CIER said.
It was the fourth consecutive month for new orders to stay in contraction mode, CIER added.
In July, the sub-index on production also shed sharply by 7.8 from a month earlier to 43.8, according to CIER.
The other three factors in the July PMI also moved lower with the sub-indexes on employment, supplier deliveries and inventories down 3.6, 5.5 and 1.2, respectively, from a month earlier to 51.5, 49.3 and 57.9, CIER said.
Despite the fall in their sub-indexes, employment and inventories were in expansion mode, CIER added.
In addition, the sub-index on the business outlook over the next six months fell 7.0 from a month earlier to 30.1 in July, marking the third consecutive month of contraction, CIER said. The sub-index dipped to the lowest level since April 2020, when it stood at 25.7.
Sectors
Among the six major industries in the July PMI, only the sub-index on the transportation equipment industry moved higher to 55.5 in July from 50.9 in June, staying in expansion mode.
However, the sub-indexes on chemicals/biotech, electronics/optoelectronics, food/textile, basic raw materials, and electrical equipment industries moved lower to 49.2, 45.5, 54.8, 47.3 and 47.2, respectively, in July. Only the food/textile industry was in expansion.
As for the service sector, Chang said, the NMI left contraction in the previous months behind as the two factors — business activity and new orders — improved significantly in July.
According to CIER, the sub-indexes on business activity and new orders rose 10.2 and 11.4, respectively, from a month earlier to 58.2 and 57.7 in July.
As for the two other major factors in the July NMI, the sub-indexes on employment and supplier deliveries also moved higher by 5.0 and 1.1, respectively, from a month earlier to 55.8 and 54.9. The four major factors were in expansion mode.
Meanwhile, the sub-index on the business outlook over the next six months rose 2.2 from a month earlier to 43.7 in July, but still stayed in contraction for the fourth consecutive month, CIER said.
Chang said the caution in the business outlook in the service sector reflected rising inflation, which has led to a rate hike cycle, and volatility in the local equity market.
Outlook
Looking ahead, Chang said, if the rate of domestic COVID-19 infections continues to slow down, private consumption will likely improve in the third and fourth quarter in Taiwan.
He said it was worth watching whether crude oil and other commodity prices will keep falling, and how the economic conditions in the United States and China will evolve, as these factors can dictate the global economy.
Source : Focus Taiwan News Channel