Manufacturing activity falls into contraction after 4-month growth streak

Taipei, Oct. 1 (CNA) Taiwan's manufacturing activity broke its four-month expansion streak in September after new orders and production fell into contraction mode, the Chung-Hua Institution for Economic Research (CIER) said Tuesday.

Data compiled by CIER, a leading economic think tank in Taiwan, showed the purchasing managers' index (PMI), a measure of the prevailing direction of economic trends in the manufacturing sector, fell 4.4 from a month earlier to 49.2 in September.

In the service sector, the non-manufacturing index (NMI) also fell 1.2 from a month earlier to 53.3 in September, the lowest since February, when it stood at 52.3. However, the data showed it remained in expansion mode for the 23rd month in a row.

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

Speaking with reporters, CIER economist Chen Hsin-hui (陳馨蕙) said although the U.S. Federal Reserve's decision to begin rate cuts in September has been reflected in manufacturer sentiment, a series of economic stimulus measures introduced by China have not yet resulted in increased demand from end users.

As a result, the new orders and production September PMI sub-indexes fell sharply by 8.2 and 10.6, respectively, from a month earlier to 48.5 and 46.8, CIER said.

Furthermore, the employment sub-index stayed in expansion despite a fall of 3.4 from August to 51.0, while the supplier deliveries sub-index bucked the downturn, and rose 0.3 to 49.8, CIER said.

Meanwhile, the inventories sub-index remained unchanged from a month earlier at 49.9, according to CIER.

Chen said many manufacturers appeared cautious, with the business outlook over six months sub-index falling 5.3 from a month earlier to 47.5, ending a seven-month expansion streak.

She said the food/textile, transportation equipment, and electrical equipment/machinery industries appeared more upbeat about their business outlook over the next six months.

Among the six major industries in the PMI, the think tank said, only the sub-indexes on transportation equipment and electric equipment/machinery industries moved higher to 50.6 and 49.4, respectively, while the sub-indexes on the chemical/biotech, electronics/optoelectronics, food/textile and basic raw material industries moved lower to 49.0, 48.6, 47.8 and 50.0 in the month.

Echoing Chen, CIER Vice President Wang Jiann-chyuan (王健全) said the fall in the local PMI to below 50 in September came at a time when the United States, China and Europe continued to report contractions in manufacturing activity.

Wang said the fall also reflected a relatively high comparison base compared to the same period last year -- when artificial intelligence development boosted production.

Among the four major factors of the September NMI, the sub-indexes on business activity and employment fell 5.0 and 0.5, respectively, from August, to 52.2 and 55.8, while the sub-indexes on new orders and supplier deliveries rose 0.7 and 0.2, respectively, to 52.2 and 53.1, CIER said.

Chen said growth in activity in the local service sector appeared to be slower in the second half of the year, due to lower employment and business activity. This follows the recent significant expansion in the post-COVID-19 era.

Chen added activity in the retail, hospitality/food and beverage and financial/insurance industries showed signs of contraction in September.