Taipei-Manufacturing activity in Taiwan was in contraction mode for a second consecutive month in June amid trade friction between the United States and China, the Chung-Hua Institution for Economic Research (CIER) said Monday.
The Purchasing Managers' Index (PMI) for June fell 0.1 points from a month earlier to 48.1, according to data compiled by the CIER before Washington and Beijing came to a truce over the weekend, but the decline was less than the 3.5-point fall seen in May.
Also affected by the trade dispute, the non-manufacturing index (NMI) for Taiwan's service sector in May fell by 2.0 from the previous month to 52.0, marking the fourth consecutive month of decline, but the latest NMI showed the sector was still in expansion mode.
The fall in June was steeper than May's 1.6.
For the PMI and NMI, readings above 50 indicate expansion or growth, while those below 50 represent contraction.
CIER President Shikuan Chen (???) said Taiwan's manufacturers remained cautious about their business outlook even as U.S. President Donald Trump and Chinese President Xi Jinping were set to meet during the G20 summit in Osaka, affecting the June PMI.
Over the weekend, Trump and Xi agreed not to escalate tariffs against each other and continue negotiations on their trade issues.
In addition, Trump announced he was lifting a ban on American companies doing business with Chinese telecom equipment maker Huawei Technologies Inc.
Chen said, however, that even if trade tensions between the U.S. and China have been eased to some extent, trade issues will remain a thorn in the two sides' relationship over the long term, and export- oriented Taiwanese companies need to focus on diversifying risk.
According to the CIER, out of the five major factors in the PMI, the sub-indexes on employment, supplier deliveries and inventories fell 0.5, 0.4 and 4.1, respectively, from a month earlier to 48.7, 47.9 and 45.5 in June, signaling contraction mode.
Bucking the downtrend, the sub-indexes on new orders and production rose 1.2 and 3.2, respectively, from a month earlier to 48.7 and 49.7, but they remained below 50 and still signaled contraction, the CIER said.
Out of the six major industries in the PMI, only the sub-index for electricity/machinery industry moved higher from a month earlier in June, while the sub-indexes on food/textile, transportation, electronics/optoelectronics, chemicals/biotech and basic raw materials industries moved lower, the CIER said.
Only the food/textile, chemicals/biotech, and electronics/optoelectronics industries were in expansion mode, the CIER added.
As for the NMI, out of its four major factors, only the sub-index on employment rose 0.3 from a month earlier to 53.8 in June, while the sub-indexes on business activity/production, new orders and supplier deliveries moved lower by 2.5, 4.1 and 1.6, respectively, to 53.0, 51.5 and 49.8, the think tank said.
Source: Focus Taiwan News Channel