PMI, NMI fall but activity remains in expansion mode

Taipei--Taiwan's purchasing managers index (PMI) for the manufacturing sector in June fell from a month earlier but remained above the 50 point threshold, indicating it is still in expansion mode, the Chung-Hua Institution for Economic Research (CIER) said on Tuesday.

Meanwhile, the non-manufacturing index (NMI) for the service sector also moved lower from a month earlier in June but similarly stayed above the 50 point mark, pointing to expansion, CIER said.

According to CIER, one of the leading think tanks in Taiwan, the manufacturing sector's PMI for June fell 1.1 points from May to 57.6, but that still marked the 16th consecutive month of expansion; the NMI dropped 2.4 points from a month earlier to 53 in June, marking the fourth straight month of expansion.

PMI and NMI readings above 50 indicate expansion, while a reading below 50 represents contraction.

CIER President Wu Chung-shu (???) said that while activity in the two sectors continues to expand, the falls indicate that the pace of economic recovery in Taiwan has slowed down to some extent.

In May, the Directorate General of Budget, Accounting and Statistics raised its economic growth forecast for 2017 to 2.05 percent from an earlier estimate of a 1.92 percent, on the back of rising global demand. In 2016, Taiwan's economy grew 1.50 percent.

Among the five factors in the June PMI, only the sub-index for new orders moved higher, up 1 point at 58.3, while the sub-indexes for the other four factors trended lower, CIER said.

The June sub-indexes for production, employment, suppliers' deliveries and inventories fell 2.7, 1.8, 1.3 and 0.5 from a month earlier, respectively, to 57.3, 58.6, 59.0 and 54.9, the think tank said.

Among the six industries that make up the manufacturing sector in the CIER model, the sub-indexes for infrastructure/raw materials and transportation for June rose from a month earlier, while those for food/textiles, electronics/optoelectronics, chemicals/biotech and electricity/machinery moved lower, CIER data showed.

As for the NMI, its four major factors fared worse in June, compared with May, with the sub-indexes for production, new orders, employment and suppliers' deliveries down 2.1, 4.3, 2.0 and 1.3, respectively, to 52.7, 53.6, 52.2 and 53.4, CIER said.

In a survey conducted by CIER, the index for manufacturing sector operations for the first half of this year was in expansion mode at 53.7 points, but the sub-index for the sector's returns stood at 40 points, in contraction mode.

Wu said that the manufacturing sector generally remains cautiously optimistic about market outlook for the next six months though concerns persist over the value of the Taiwan dollar, cross-strait ties, raw material prices and labor costs.

Source: Focus Taiwan News Channel