Manufacturing activity returns to expansion in November

Taipei, Dec. 2 (CNA) Manufacturing activity in Taiwan improved and returned to expansion mode in November as foreign clients rushed to place orders with export-oriented Taiwanese manufacturers ahead of the inauguration of U.S. President-elect Donald Trump, who has threatened to slap tariffs on goods from countries that have large trade surpluses with Washington, the Chung-Hua Institution for Economic Research (CIER) said Monday.

Data compiled by CIER, one of the leading economic think tanks in Taiwan, showed the local November purchasing managers' index (PMI), which gauges the fundamentals of the manufacturing sector, rose 1.4 from a month earlier to 51.4.

In the service sector, the nonmanufacturing index (NMI) rose 0.8 from a month earlier to 54.6 in November, marking the 25th consecutive month of expansion the data indicated.

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

Among the five major factors in the November PMI, the subindexes on new orders, production and inventories moved higher by 3.6, 4.0 and 1.4, respectively, from a month earlier to 55.5, 54.5 and 48.6 in November, CIER said. Only the inventories factor was in contraction.

CIER said the Trump effect sent orders placed on Taiwanese electronics and optoelectronics suppliers in the month higher to boost the new order factor.

Bucking the upturn, the subindexes on employment and supplier deliveries moved lower by 1.4 and 0.5 from a month earlier to 50.3 and 48.3, CIER said. The supplier deliveries factor stayed in contraction.

At a news conference, CIER President Lien Hsien-ming (連賢明) said the growth in the November PMI was limited.

"Although new orders received by optoelectronics and information communications technology industry appeared good, many manufacturers stayed cautious toward their business outlook over the next six months," Lien said.

The subindex on the business outlook over the next six months for November fell 0.4 from a month earlier to 47.9 in contraction mode.

"Despite the end of the U.S. presidential vote, uncertainty remained in place so many manufacturers still held a wait-and-see attitude, watching closely what Trump will do after he returns to the White House," Lien said.

At the same news conference, CIER economist Chen Hsin-hui (陳馨蕙) said she suspected many manufacturers secured only rush orders instead of long-term orders.

By industry, CIER said, only three out of the six major industries showed signs of improving with the sub-indexes on the chemical and biotech, electronics and optoelectronics, and basic raw material industries trending higher in November. The chemical and biotech, and the basic raw material industries returned to expansion mode, while the electronics and optoelectronics industry stayed in contraction.

On the other hand, the subindexes on the food and textile, transportation equipment, and electricity and electric equipment industries moved lower in November. Despite the fall in the index, the electric equipment industry stayed in expansion, while the food and textile index was at 50 in the cutoff between expansion and contraction, and the transportation equipment industry remained in contraction, CIER said.

Among the four major factors in the November NMI, CIER said, the subindexes on business activity and new orders moved higher by 1.4 and 3.7, respectively, from a month earlier to 55.2 and 54.8, while the sub-indexes on employment and supplier deliveries moved lower by 1.5 and 0.2, respectively, to 54.1 and 54.4. The four factors remained in expansion.

In addition, the subindex on business outlook over the next six months fell 0.9 from a month earlier to 50.6 in November but stayed in expansion, CIER said. It was the 13th straight month of expansion, CIER added.

CIER said with the year coming to an end, peak season effects continued to boost the local service sector, but a cooling home market and a fallback in the stock market led the business activity in the property market to fall to contraction mode.