Taiwan’s Purchasing Manager’s Index (PMI) in July dropped 2.2 points to 48.6. That was the word from the Chung-Hua Institution for Economic Research on Monday. The PMI is an indicator of the health of the manufacturing sector. A reading of over 50 indicates growth while under 50 means contraction from the previous month.
The Non-Manufacturing Index (NMI) went up 1.6 points to 52.1. The institute’s director Wu Chung-shu said there’s a conservative outlook for the next six months for the non-manufacturing and manufacturing sectors. But since the electronics industry is very dynamic, it is hard to predict what may happen.
The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
Manufacturers’ outlook for the next six months went down 10.5 points to 42.6, which is the lowest in three years. The outlook for the non-manufacturing sector also dropped 5.8 points to 39.3, the lowest since August, 2014.
As for the outlook for the economy, Wu said the slowing of global demand and China’s economy will impact Taiwan since exports account for 70% of Taiwan’s GDP. He said it will be hard for Taiwan to hit a 3% GDP growth rate this year. But the government should work to make Taiwan a more attractive place for foreign investment. As the global demand recovers, Taiwan’s economy should as well.