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Taiwan PMI still weak in March, but business outlook improving

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Taipei, April 1 (CNA) Taiwan's manufacturing activity remained in contraction mode for a 13th consecutive month in March, but the sub-index on business prospects over the next six months hit a two-year high, the Chung-Hua Institution for Economic Research (CIER) said Monday.

The purchasing managers' index (PMI), a measure of the prevailing direction of economic trends in manufacturing, fell 0.2 points from a month earlier to 47.9 in March after a 0.1-point increase in February, data compiled by the CIER showed.

The fall in the March PMI largely reflected weakness in new orders and production, the CIER said.

In the service sector, the non-manufacturing index (NMI) rose 1.2 points from a month earlier to 53.5 in March, remaining in expansion mode for a 17th straight month.

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

Among the five factors comprising the March PMI, the sub-indexes for new orders and production moved lower by 2.0 and 4.2 points, respectively, to 46.9 and 47.3, the CIER said.

The sub-indexes for employment, supplier deliveries and inventories moved higher by 1.2, 1.6 and 2.4 points, respectively, from a month earlier to 48.9, 49.4 and 46.9 in March, but all still remained below the 50-point threshold, indicating contraction, the CIER said.

In March, the sub-index for the business outlook rose 2.4 points from a month earlier to 56.4, the highest level since March 2022, when it was 60.9.

CIER Vice President Chen Shin-horng (陳信宏) said the declines of some sub-indexes in the March PMI were because of seasonal factors, but the improving business outlook reading showed that manufacturers were optimistic that their businesses would get better.

In particular, Chen said, the business outlook in the electronics and optoelectronics sector rose to above 60 in March due to ongoing demand for semiconductors, artificial intelligence applications and high-end IC packaging technologies.

By sector, all six major industrial sectors saw their manufacturing activity improve in March, according to the think tank.

The sub-indexes for the chemical and biotech, electronics and optoelectronics, food and textile, basic raw material, and electrical equipment and machinery sectors all moved into expansion territory, the CIER said.

The transportation equipment sector sub-index also rose but stayed in contraction mode, the CIER said.

Steve Lai (賴樹鑫), executive director of the Supply Management Institute in Taiwan, said high interest rates in the U.S. and European markets have affected end-user demand, and trade tensions between Washington and Beijing and general geopolitical tensions are still hurting global manufacturing activity.

Lai was upbeat, however, over Taiwan's edge in semiconductors and said it will likely take advantage of its IC development strength to play a critical role in emerging technologies such as AI applications, automotive electronics and high performance computing (HPC) devices.

Economist Kamhon Kan (簡錦漢) from Academia Sinica said that if demand from end users in the United States, Europe and China recovers, Taiwan's manufacturing sector should benefit.

As for the service sector, two of the four major factors in the NMI -- business activity and new orders -- moved higher by 4.2 and 2.2 points, respectively, from a month earlier to 53.4 and 54.4 in March, indicating expansion, CIER said.

The sub-indexes for employment and supplier deliveries moved lower by 0.4 and 1.0 point, respectively, from a month earlier to 53.6 and 52.8 in March, the CIER said.

In addition, the sub-index for the business outlook over the next six months also rose 2.0 from a month earlier to 59.1, the highest level in about two years, marking the fifth consecutive month of expansion, according to the CIER.

CIER economist Chen Hsin-hui (陳馨蕙) said that although domestic demand stayed solid, rising costs and labor shortages were expected to post challenges to the local service sector.

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