Manufacturing activity expansion pace slows in October

2018/11/05 14:53:06 fontsize-small fontsize-default fontsize-big
Manufacturing activity expansion pace slows in October

Taipei, Nov. 5 (CNA) The pace of Taiwan's manufacturing activity expansion appeared to be slowing in October at a time of continued trade tension between the United States and China, the Chung-Hua Institution for Economic Research (CIER) said Monday.

In addition, CIER, one of Taiwan's leading think tanks, said a fall in raw material prices in the international market was also a cause of the slower expansion pace in the local manufacturing activity.

With orders received by many export-oriented manufacturers in Taiwan falling, the Purchasing Managers' Index (PMI) for October fell 2.1 from a month earlier to 51.8, the lowest since April 2016, when the PMI stood at 51.2.

The latest PMI data released by CIER came amid a fall in the Nikkei-Markit Taiwan Manufacturing PMI for October released last week, indicating that the Nikkei-compiled figure fell to 48.7 from 50.8 in September, the first drop in more than two years, another indicator of slowing activity in the local manufacturing sector.

In terms of the service sector, the non-manufacturing index (NMI) for October also fell 0.9 from a month earlier to 49.9 in October.

In both the PMI and NMI, readings above 50 indicate expansion or growth, while those below 50 represent contraction.

Wang Jiann-chyuan (王健全), acting president of CIER, told the press that the trade dispute between Washington and Beijing, the top two economies in the world, have had an adverse impact on the global economy.

As Taiwan's economic activity is highly correlated with the U.S. and China -- the two largest buyers of Taiwan-made goods -- uncertainty over orders taken by Taiwanese exporters emerged, affecting the entire manufacturing sector, Wang said.

In September, the U.S. imposed a 10 percent tariff on US$200 billion-worth of Chinese goods after a 25 percent tariff on US$60 billion-worth of Chinese merchandise earlier this year. The 10 percent tariff is expected to rise to 25 percent by the end of this year.

While U.S. President Donald Trump had threatened a tariff targeting an additional US$267 billion-worth of Chinese goods, he said last week that he had already had a "very good" phone conversation with Chinese President Xi Jinping on the trade issues.

A decline in raw material prices in the global market has forced many foreign buyers to put their purchases on hold, which dealt another blow to Taiwan's manufacturing sector, Wang said.

Of the five major factors in the October PMI, only the sub-index for production moved higher, up 1.2 from a month earlier to 56.1, CIER said.

The sub-indexes for new orders, employment, suppliers' deliveries and inventories fell 4.0, 2.3, 3.2 and 2.1, respectively, from a month earlier to 51.2, 50.3, 51.6 and 50.0, but all of them remained above 50 to stay in expansion mode, CIER said.

The think tank said that of the six industrial sectors covered by the PMI, only the food/textile industry moved higher from a month earlier in October.

The sub-indexes for the electronics/optoelectronics, chemicals/biotech, electricity/machinery, basic raw materials and transportation industries fell in October, the think tank added.

As for the NMI, the CIER said, the sub-indexes for two of its four major factors -- business activity/production and employment -- moved higher, up 0.2 and 2.3, respectively, from a month earlier to 46.6 and 53.7 in October, but the business activity/production factor was in contraction mode, CIER said.

On the other hand, the sub-indexes on new orders and suppliers' deliveries fell 3.6 and 2.6, respectively, from a month earlier to 49.2 and 50.2 in October, but the suppliers' deliveries remained in expansion mode, CIER added.

(By Frances Huang)
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