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The HSBC Taiwan Purchasing Managers’ Index (PMI) posted 54.7 in December, a solid increase on November’s 51.7. The latest reading signalled an improvement in business conditions that was stronger than the long-run series average.

Incoming new business received by manufacturers in Taiwan increased for a second successive month in December. Moreover, the latest expansion in new work intakes was marked, and the strongest since May. New orders received from overseas markets also rose during the month. Demand from Europe was a principal source of export growth.

The December data signalled a marked rise in output, reflective of the expansion in overall new business. However, backlogs of work at manufacturers in Taiwan increased and the rate of accumulation was notably sharp in the context of historical data. This indicated that output growth was not sufficient to meet the rise in new work intakes. Shortages of certain materials have led to delays in production.

Employment in the Taiwanese manufacturing sector rose for an eighteenth month running in December. Sustained rises in output and new orders drove the increase in staffing levels, which was the strongest since August.

Manufacturers in Taiwan reported a rise in purchasing activity during December, ending a four-month sequence of reduction. The increase in input buying reflected higher production requirements, and was above the long-run series average. In line with the rise in purchasing activity, suppliers’ delivery times lengthened during the month. The deterioration in vendor performance was compounded by shortages of certain materials.

Input costs faced by manufacturers in Taiwan increased at their sharpest rate in nine months. Moreover, December’s input price inflation was steep in the context of historical data. Output prices rose at their strongest pace since April 2010.

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