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Manufacturing activity in contraction mode in May

2019/06/03 17:56:56

Taipei, June 3 (CNA) The local manufacturing activity fell into contraction mode in May, reversing an expansion a month earlier, amid rising trade tension between the United States and China, the Chung-Hua Institution for Economic Research (CIER) said Monday.

Data compiled by CIER, one of Taiwan's leading economic think tanks, said the Purchasing Managers' Index (PMI) for May fell 3.5 points from a month earlier to 48.2.

Also affected by the trade dispute, the non-manufacturing index (NMI) for the local service sector in May fell by 1.6 the previous month to 54.0, marking the third consecutive month of decline, although the latest NMI remained in expansion mode.

For the PMI and NMI, readings above 50 indicate expansion or growth, while those below 50 represent contraction.

CIER President Shikuan Chen (陳思寬) told the press that U.S. President Donald Trump increased trade tension with China by threatening to impose punitive tariffs on an additional US$300 billion-worth of Chinese goods, making many export-oriented manufacturers in Taiwan wary.

In addition, Trump's move in mid-May to declare a national economic emergency to empower the U.S. government to ban the technology and services of "foreign adversaries," mainly targeting Chinese telecom equipment maker Huawei Technologies Co., also weakened the local manufacturing sector's confidence.

Since then, Google Inc. has restricted Huawei's access to its Android operating system and has limited access to its apps such as Gmail and the Google Play store in new handsets made by Huawei.

In addition, other tech giants such as ARM Holdings, Intel, Qualcomm, Broadcom and Micron Technology have also announced that they will suspend business or terminate cooperation with Huawei.

Under such circumstances, Chen said, many Taiwanese firms with operations in China have seen the global supply chain disrupted, which sent their manufacturing activity lower in May.

In May, all of the five major factors in the PMI fell from a month earlier into contraction mode, CIER said.

The sub-indexes on new orders, production, employment, suppliers' deliveries and inventories, fell 3.4, 5.4, 2.3, 2.2 and 4.1, respectively, from a month earlier to 47.5, 46.5, 49.2, 48.3 and 49.6 in May.

Among the six major industries in the local PMI, only the sub-index for the food/textile industry was higher in May, while the sub-indexes for transportation, electronics/optoelectronics, chemicals/biotech, basic raw materials and electricity/machinery industries moved lower.

According to CIER, basic raw materials and electricity/machinery industries were in contraction mode.

As for the NMI, out of its four major factors, only the sub-index on employment rose 0.4 from a month earlier to 53.5 in May, while the sub-indexes on business activity/production, new orders and supplier deliveries moved lower by 3.1, 2.9 and 0.8, respectively, to 55.5, 55.6 and 51.4., the think tank said.

(By Liu Li-jung and Frances Huang)