Manufacturing activity in contraction for 9th straight month
Taipei, Dec. 1 (CNA) Manufacturing activity in Taiwan continued to weaken, contracting for the ninth consecutive month in November with production and employment on the decline as the export-oriented manufacturing sector continued to feel the pinch from global demand weakness, the Chung-Hua Institution for Economic Research (CIER) said Friday.
Data compiled by CIER, one of the leading think tanks in Taiwan, showed the purchasing managers' index (PMI) moved lower by 0.3 points from a month earlier to 46.8 in November.
In the service sector, the non-manufacturing index (NMI) bucked the downturn, rising 3.0 from a month earlier to 56.2 in expansion mode in November, the data indicated.
For the PMI and NMI, readings above 50 indicate expansion, while those below 50 represent contraction.
Among the major factors in the November PMI, sub-indexes on production and employment fell 1.2 and 0.7, respectively, from a month earlier to 48.2 and 47.9, while the sub-index on inventories also moved lower by 0.1 from a month earlier to 42.7, CIER said. The three factors were all in contraction.
On the other hand, the sub-indexes on new orders and supplier deliveries moved higher by 0.3 and 0.5, respectively, from a month earlier to 48.6 and 46.7 in November, but remained in contraction mode.
In addition, the sub-index on the outlook over the next six months rose 2.7 from a month earlier to 42.5 in November, according to CIER.
Reading the data
Speaking with reporters, CIER President Yeh Chun-hsien (葉俊顯) said the major factors in the November PMI all moved in a narrow range, indicating many manufacturers in Taiwan are still waiting for positive leads such as a significant increase in demand from the United States, the largest economy in the world and one of the leading buyers of Taiwan-made goods.
The market widely anticipates that the U.S. Federal Reserve will kick off a rate cut cycle next year, a move which is likely to push up demand from the U.S. market, Yeh said.
As for China, the second largest economy in the world and largest buyer of Taiwan's merchandise, the Chinese authorities have introduced measures to stimulate the economy, in an attempt to give an additional boost to global demand, Yeh added.
Echoing Yeh, economist Kamhon Kan (簡錦漢) from Academia Sinica said he has also expects the Fed to cut interest rates next year so Taiwan is likely to see an increase in demand from overseas and its economy stage a rebound.
By industry, most of the six major industries saw activity improve in November with the sub-indexes for the chemical and biotech, food and textile, and transportation equipment industries moving higher from a month earlier and were in expansion mode in November, CIER said.
The sub-indexes for electronics and optoelectronics and basic raw material industries also rose from a month earlier but remained in contraction in November, CIER added.
In addition, the sub-index on the electrical equipment and machinery industry moved lower and stayed in contraction in November, according to CIER.
As for the NMI, the four major factors all improved from a month earlier in November with the sub-indexes on business activity, new orders, employment and supplier deliveries rising 3.2, 7.6, 0.9 and 0.5 from October to 56.2, 58.2, 56.5 and 54.0 in November, with all in expansion mode, CIER said.
The sub-index on business outlook over the next six months moved sharply higher by 9.4 from a month earlier to 54.5, according to CIER.
The booming NMI reflected strong demand during the Nov. 11 single day buying spree and the year-end peak shopping season, while a strong showing by the local stock market, where the Taiex, the weighted index on the Taiwan Stock Exchange, soared 1,432.58 points, or 8.95 percent, in November also boosted sentiment in the service sector, Yeh said.
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