Taiwan Manufacturing Falls at Fastest Rate in Ten Months

Michelle Remo, “Big 4″ observer
October 01, 2012 /

Falling demand in domestic and international markets led to a fourth successive fall in Taaiwan’s manufacturing output.

New orders and new export business both fell at the fastest rates in ten months. Survey panellists mentioned
that deteriorating business conditions worldwide led to reduced demand for manufactured products.

Donna Kwok, Economist at HSBC in Asia said: “Taiwan’s manufacturing engine slowed through the third quarter, as de-stocking picked up pace again in response to the deepening global trade slump. This will pose a major drag on the next GDP release, but the job market’s continued resilience should set a floor beneath domestic demand to offer a partial counterbalance. As Mainland demand stabilizes in the coming months, we expect Taiwan’s shipments to resume a modest pace of expansion in Q4.”

Despite the falls in output and new orders, employment levels at manufacturing firms remained relatively
unchanged in September. Backlogs of work decreased for the fourth consecutive month in September. The rate
of decline accelerated to the sharpest since the end of 2011. Some survey respondents attributed lower backlogs to subdued demand which resulted in excess capacity at their plants.

Input costs at Taiwanese manufacturing firms fell for the fifth successive month in September. However, the rate of reduction slowed in September and was only marginal. Anecdotal evidence suggested that input
costs declined in accordance with falling raw material costs.

Output charges fell in September for the sixth successive month, although the pace of reduction slowed. Panellists indicated the fall in output charges reflected lower input prices, but was also in response to
ongoing competitive pressures.

Purchasing activity decreased for the third consecutive month in September. The fall was the sharpest in ten
months. Average lead times continued to improve, albeit marginally, and respondents linked this to a reduction in demand for inputs.

The volume of pre-production inventories in the Taiwanese manufacturing sector fell in September for the third consecutive month. Meanwhile, stocks of finished goods fell at the sharpest rate in ten months.

Anecdotal evidence suggested the depletion of stocks reflected a fall in the volume of new orders and production requirements.


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