Taiwan PMI still strong in February but outlook weakens

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Taipei: Taiwan's manufacturing sector remained in expansion mode in February but the service sector was dealt a major blow by worries over the spread of the novel coronavirus (COVID 19), a recent survey has found.

Taiwan's Purchasing Managers' Index (PMI) for February rose 1.4 points from a month earlier to 52.7 while the non manufacturing index (NMI) for Taiwan's service sector plummeted 14.6 points from a month earlier in February to 40.4.

The plunge in the NMI was the steepest since August 2014 when the index was launched and ended 11 straight months of expansion for the sector, according to the Chung Hua Institution for Economic Research (CIER), which compiles the monthly PMI and NMI.

For the PMI and NMI, readings above 50 indicate expansion or growth, while those below that figure represent contraction.

The CIER said Taiwan's PMI remained above 50 in February for the fifth consecutive month, largely reflecting an improvement in two of the index's 14 factors new orders and supplier deliveries.

The sub index on new orders rose 1.9 points from a month earlier to 56.9 in February, marking the sixth straight month of expansion, while the sub index on supplier deliveries rose 6.0 points from a month earlier to 63.1, the biggest gain since the CIER started to compile the PMI data in July 2012.

The sub index on production also rose 6.9 points from a month earlier to 48.6 in February, although it still remained below the growth threshold of 50, the CIER said.

On the other hand, the sub indexes for employment and inventories fell from a month earlier by 1.9 and 5.9 points, respectively, to 50.9 and 44.1 in February, the CIER said.

Of particular note, the PMI sub index for the business outlook over the next six months among manufacturers fell 26.9 points from a month earlier to 36.8 in February, breaking a two month rising streak, amid rising fears over the spread of the coronavirus worldwide.

The fall was the biggest for the sub index in a single month in the PMI survey's nearly eight year history.

Thus, despite the gains in February, the CIER was cautious about the manufacturing sector's prospects because of the disruption to global supply chains resulting from the lockdowns of about 50 cities in China to contain the spread of the coronavirus.

Among the six major industries in the PMI index, only one industry the raw materials sector moved higher despite the rise in the overall index.

The sector, which factored heavily in the PMI sub indexes that gained ground, rose to 47.1.

The sub indexes for the chemical/biotech, electronics/optoelectronics, food/textile, and transportation vehicles and electricity/machinery moved lower from a month earlier, and only the chemical/biotech industry remained above 50 at 50.7.

In the service sector, the CIER said all of the major four factors business activity, new orders, employment and supplier deliveries fell 26.1, 20.1, 9.3 and 2.9 points, respectively, from a month earlier to 30.5, 34.7. 46.0 and 50.3 in February.

CIER said the falls in the four factors also reflected a downbeat mood because of concerns over the widening COVID 19 epidemic

Source: Focus Taiwan News Channel