Wednesday, December 2, 2009

Taiwan industrial sector robust, but PMI slips to 58.4

The headline Purchasing Managers’ Index posted 58.4 in November, indicating marked growth of the Taiwan manufacturing sector. However, the rate of expansion eased since October, when the PMI registered a two-year high of 59.8.



Growth in new order volumes continued to underpin the PMI during November. The pace of expansion in new business was substantial, despite easing marginally since October, and remained markedly faster than the historical average for the series. Similarly, new export orders rose markedly, extending the sequence of sustained growth to seven months.



Reflective of the slower growth in new order volumes, the pace of expansion in production eased since October, although remained strong in the context of historical data. November marked the ninth successive month of output growth.



Backlogs continued to rise during the month, although the rate of increase eased since October indicating that production capacity remained under some pressure. Meanwhile, stocks of finished goods declined only marginally, with the pace of reduction easing for the fifth successive month.



Manufacturers in Taiwan sustained their efforts to increase production capacity, with employment rising for the fifth successive month. Moreover, the rate of increase accelerated since October to the highest in 22 months.



Reflective of increased order volumes, purchasing activity rose during November and at a marked rate. Due to the higher level of purchasing activity, suppliers’ delivery times lengthened as capacity at vendors was fully utilized. Moreover, panelists commented that raw material shortages had compounded capacity issues.



Overall, pricing pressures within the Taiwan manufacturing sector appeared to build further. Input prices rose considerably, accelerating robustly from the sharp inflation recorded in October. However, competition prevalent in the market prevented manufacturers from passing on the full rise in raw material costs to customers. Output prices were increased marginally as pricing power remained weak.



Commenting on the Taiwan Manufacturing PMI survey, Frederic Neumann, senior Asian economist at HSBC, said: “Taiwan's economy is finishing the year on a strong note. While activity appears to have slowed sequentially over the last month, the level of output remains marked and we expect another strong GDP reading for the fourth quarter. Export order growth eased in November, although remained steep. However, a strong recovery in the employment index suggests that domestic demand remains buoyant and firms confident about the further demand follow-through. Employment is rising despite some margin pressure on firms, which have seen input prices rise relative to output prices over the last several months.”

Source: reliableplant.com/

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