The precautionary stockpiling of goods by customers drove a solid expansion in production by Taiwan manufacturers in May, reported S&P Global on Monday.
Taiwan's manufacturing purchasing managers index (PMI) rose to a seasonally adjusted 56.1 in May, up from 55.3 in April, and striking further above the 50-mark that separates growth from contraction, reported S&P Global, citing its monthly survey.
Despite Persian Gulf turmoil, Taiwan's factory-sector business "conditions have now strengthened in each of the past six months," said S&P Global. "Helping to push up the headline PMI figure was a stronger increase in output during May. Taiwanese manufacturers recorded the steepest increase in production since July 2021."
The uncertain global economy did not appear to hamper the trade-oriented Taiwan's prospects in May.
Taiwan manufacturers reported that "new export orders meanwhile rose at a solid pace that matched that seen in April, with higher demand reported across key markets such as the US, Europe, Japan and mainland China," reported S&P Global.
However, Taiwan factory managers in May were stretching to source inputs, and keep production floors supplied. "The latest survey pointed to greater strain on supply chains, with average lead times for inputs lengthening at... most pronounced pace since March 2022," said S&P Global. "There were frequent reports that shipping delays and product shortages amid the war in the Middle East had weighed on supplier performance."
Higher operating and input costs triggered compensatory price hikes by Taiwanese industrialists in May. "In order to protect their margins, manufacturers in Taiwan raised their selling prices again in May," explained S&P Global.
In addition, Taiwan factory managers, in part to hold down costs, did not add to payrolls in in May, reported S&P Global.
There were some concerns that demand for Taiwan manufactured product could cool in months ahead, once customers have enough buffer stocks built up. The "current momentum could soon fade once inventories are replenished, especially if cost pressures continue to build," advised S&P Global.
Nevertheless, Taiwan's manufacturers in May were confident in the 12-month outlook. "There were hopes that further increases in customer demand, particularly in areas such as electronics and AI, could help to boost production in the months ahead," said S&P Global.
The Taiwan manufacturing PMI was compiled by S&P Global survey sent to 300 manufacturers from May 12 through May 20.
