Operating Conditions of Taiwanese Manufacturers Improve at Quickest Pace in Over 3 Years

Taiwanese manufacturers signaled a robust improvement in overall business conditions during July, with output, total new orders and new export orders all rising sharply over the month.

"Taiwan's economy is lifting off as demand and output conditions improve simultaneously," says John Zhu, Economist at HSBC in Asia. There was also a sharp rise in input prices, but that was likely to be down to the temporary spike in oil prices in July."

At 55.8 in July, the HSBC Taiwan Purchasing Managers’ Index (PMI) was up from 54.0 in June and signaled a robust improvement in the health of Taiwan‟s manufacturing sector. Moreover, it was the sharpest pace of improvement since April 2011.

Average input price inflation accelerated to a 38-month high, while output charges continued to fall, albeit marginally.

Total new business received by Taiwanese manufacturers rose sharply in July, with over 32% of panelists noting higher volumes of new work.

Furthermore, it was the strongest expansion of new orders for three-and-a-half years. Total new export work rose at a similarly robust rate, with a number ofpanelists mentioning that client demand was particularly strong in Europe and the US.

In response to increased new work intakes, Taiwanese manufacturers raised their production levels for the eleventh month running in July. Moreover, the rate of output growth was the sharpest since January and faster than the series average.

Staffing levels increased for the fourteenth successive month in July, and at a solid pace. Furthermore, it was the quickest expansion of workforce numbers since April 2011.

Despite increased employment, capacity pressures persisted, however, as signaled by a marked increase in backlogs of work.

In line with higher production requirements, purchasing activity at Taiwanese manufacturers increased in July.

The rate of growth was the strongest since January and sharp. Consequently, stocks of purchases rose for the third month running, and at the quickest pace since January.

Greater demand for inputs led to a renewed deterioration in vendor performance in July. However, the rate at which delivery times lengthened was only slight.

On the costs front, average input prices rose sharply in July. Furthermore, it was the fastest rate of input price inflation since May 2011. Meanwhile, output charges declined in July, albeit at the slowest rate in six months.


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