Taipei, Feb. 1 (CNA) Taiwan's manufacturing activity remained in contraction for the 11th consecutive month in January, but an index gauging the condition of the local manufacturing sector improved from a month earlier, the Chung-Hua Institution for Economic Research (CIER) said Thursday.
With the sub-index on the business outlook recovering for the third month in a row, the January purchasing managers' index (PMI) rose 1.2 points from a month earlier to 48.0, according to CIER, one of the leading economic think tanks in Taiwan.
In January, the sub-index on the business outlook over the next six months rose 0.8 points from a month earlier to 46.2, the highest level since March 2023, when the sub-index also stood at 46.2, CIER said.
In the service sector, the non-manufacturing index (NMI) stayed in expansion mode in January for the 15th straight month but the index fell 2.5 points from a month earlier to 53.5, CIER added.
For the PMI and NMI, readings above 50 indicate expansion, while those below 50 represent contraction.
PMI
Among the five other major factors in the January PMI, three moved higher with the sub-indexes on production, employment and supplier deliveries up 4.0, 0.5 and 1.6, respectively, from a month earlier to 51.3, 48.3 and 48.4, but only production returned to expansion mode.
Bucking the upturn, the sub-indexes on new orders and inventories moved lower by 0.3 and 0.1, respectively, from a month earlier to 46.2 and 45.7 in January, and remained in contraction.
At a news conference, CIER President Yeh Chun-hsien (葉俊顯) said local manufacturing activity remains in contraction largely due to escalating geopolitical tensions, a crisis in the Red Sea, where commercial vessels have been attacked by Houthi militants, and the military conflict between Israel and Hamas, which have created volatility in global raw material prices.
As a result, many manufacturers had to adjust production and reschedule deliveries causing uncertainties in the sector, Yeh said.
In addition, global demand from end-users remained weak, making manufacturers cautious about their capacity utilization and investments, he added.
Signs of recovery
However, an increase in the January PMI showed signs of recovering, signaling positive leads for future developments, Yeh said, adding that the local manufacturing sector is braving the headwinds and moving ahead.
In January, the sub-indexes for four of the major industries in the PMI -- the electronics and optoelectronics, food and textile, basic raw materials, and electrical equipment and machinery industries -- moved higher from a month earlier with the food and textile, and basic raw materials industries in expansion, CIER said.
On the other hand, the sub-indexes for the chemical and biotech, and transportation equipment industries moved lower from a month earlier in January, and both remained in contraction, CIER added.
Echoing Yeh, economist Kamhon Kan (簡錦漢) from Academia Sinica said the sub-index on production stopped a three-month streak of contraction in January, and South Korea reported double-digit growth in exports for the same month, indicating demand from end-users is slowly growing.
Nevertheless, the economy is unlikely to stage a sharp rebound and is expected to recover at a mild pace, Kan said
NHI
As for the NMI, CIER said, the sub-index on employment moved higher by 2.4 from a month earlier to 58.3 in January, while the sub-indexes for the other three factors -- business activity, new orders and supplier deliveries moved lower by 6.0, 4.7 and 1.6, respectively, from a month earlier to 52.8, 51.6 and 51.4. The four factors stayed in expansion.
In addition, the sub-index on the business outlook over the next six months fell 2.6 from a month earlier to 55.2, CIER added.
CIER economist Chen Hsin-hui (陳馨蕙) said domestic spending is expected to continue to grow this year but growth could moderate due to a relatively high comparison base over 2023, so suppliers in the local service sector need to think about how to resolve bottlenecks.
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