Taiwan's PMI ends 2-month falling streak in July

08/02/2021 04:13 PM
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CNA file photo
CNA file photo

Taipei, Aug. 2 (CNA) Taiwan's Purchasing Managers' Index (PMI), which gauges manufacturing activity, ended a two-month falling streak in July, showing a business uptrend continuing on the back of strong 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 local PMI for July rose 1.2 after seasonal adjustments from a month earlier to 65.2, after a 2.7 decline in May and a 2.0 fall in June.

Despite the drops in the previous two months, Taiwan's manufacturing activity remained in expansion mode for the 13th consecutive month in July, and the index stayed above the 60 mark for the ninth straight month, according to the data.

In July, the non-manufacturing index (NMI), which covers service sector activity, also rose 7.2 from a month earlier to 53.2 in July after a fall of 3.2 in June as Taiwan saw a decline in domestically transmitted COVID-19 cases, CIER said.

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

Among the five major factors that make up Taiwan's PMI, four moved higher from a month earlier with only the sub-index on supplier deliveries down 3.1 from a month earlier to 68.5, but remained in expansion mode.

The sub-indexes on new orders, production, employment, and inventories rose 3.1, 3.1, 1.1 and 2.0, respectively, from a month earlier to 67.8, 66.9, 60.2 and 62.7 in July, CIER said.

CIER President Chang Chuang-chang (張傳章) said the PMI remaining above 60 for the past nine months shows the local manufacturing sector has ridden a wave of strong growth and those robust conditions are expected to continue.

Citing the sub-index on the factor assessing business outlook over the next six months, which rose 1.9 from a month ago to 66.2, marking the 12th consecutive month of expansion, Chang said optimism toward manufacturing activity remains on an uptrend.

However, some manufacturers in the mid-stream and downstream segments indicate their customers have started to adjust inventories to avoid possible risks after aggressive purchasing in previous months amid a resurgence of COVID-19 and natural disasters like floods in China, he added.

The sub-indexes for five of the six major industry groups covered by the PMI -- electronics/optoelectronics, food and textiles, electrical equipment and machinery, chemicals and biotech and basic raw materials -- moved higher from the previous month in July and remained in expansion mode, the CIER said.

Bucking the upturn, the sub-index on transportation equipment moved lower but stayed in expansion mode, CIER added.

For the NMI, three of its four major factors moved higher, while only the sub-index on supplier deliveries fell 0.3 from a month earlier to 57.6 in July, CIER said.

The sub-indexes on business activity, new orders and employment rose 15.2, 12.5 and 1.4, respectively, from a month earlier to 53.9, 51.0 and 50.1 in July, CIER added.

Following the lowering of the COVID-19 alert on July 27, easing restrictions on people's movement, optimism from the service sector has grown accordingly, with the sub-index on business outlook over the next six months up 12.3 from a month earlier to 54.1 in July, back into expansion mode, Chang said.

However, whether domestic demand will recover depends on how the vaccination program is carried out, how long border controls remain in place and how COVID-19 variants evolve worldwide, he added.

(By Pan Tzu-yu and Frances Huang)

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