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Taiwan manufacturing loses growth momentum in September

posted onOctober 4, 2021

The manufacturing sector in Taiwan saw a further loss of growth momentum during September, the latest survey from Markit Economics showed on Friday (Oct. 1).

At 54.7 last month, the IHS Markit Taiwan Manufacturing Purchasing Managers’ Index (PMI) was down from 58.5 in August, pointing to the lowest reading since August 2020, as both output and new orders grew at the slowest pace since July 2020. 

Supply chain delays remain severe, input costs continue to rise sharply while business confidence dipped to 15-month low amid concerns around the outlook largely stemmed from COVID-19 related uncertainty, subdued demand conditions and input shortages.

Taiwanese goods producers noted a much softer rise in overall new work at the end of the third quarter. Notably, the rate of increase was the weakest recorded for 14 months and only mild. The pandemic was reportedly a key factor weighing on sales. New export business also expanded at a slower pace, though the upturn was nonetheless sharp overall. 

In line with the trend for total new work, production increased only modestly in September, with the rate of growth also slipping to a 14-month low. Companies commented that raw material shortages and supplier delays had also limited production. Though not as widespread as in August, supply chain delays remained severe in September. Material shortages, insufficient vendor capacity and logistical delays all stretched lead times further. 

Meanwhile, the rate of job creation eased to the second-lowest seen in the year-to-date. Staff hiring was often attributed to efforts to boost capacity as well as the filling of vacancies. On the price front, input costs inflation slowed to a 10-month low. Meanwhile, output cost inflation accelerated, as firms increasingly sought to pass higher costs on to clients.

"The latest PMI data for Taiwan highlighted a further notable slowdown in growth momentum at the end of the third quarter, as manufacturers registered the softest rises in production and new work for over a year” Annabel Fiddes, Economics Associate Director at IHS Markit, said. "It will be crucial for supply chains to improve in order for operations to fully normalise and for a sustained economic recovery to get underway” she added. 

Albeit the index remained well above the boom-or-bust line of 50 that separates expansion from contraction, pointing to a continued, albeit moderating, improvement in business conditions from the previous month. 

Focus Economics Consensus Forecast panelists currently project fixed investment to expand 9.5% in 2021, which is up 0.6 percentage points from last month’s forecast. For 2022, participants see fixed investment increasing 4.0%, which is up 0.2 percentage points from the previous month’s estimate. 

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