Taiwan’s manufacturers cut jobs amidst lowest confidence levels

Confidence in the outlook reached its lowest point in 2024.

The growth of Taiwan’s manufacturing sector softened in September, with both output and new orders posting weaker gains, according to an S&P Global PMI survey.

The S&P Global Taiwan Manufacturing Purchasing Managers’ Index (PMI), adjusted for seasonal influences, stood at 50.8 in September, indicating a sixth consecutive month of improved operating conditions. However, with the index dropping from 51.5 in August, the growth rate was marginal and the slowest since April.

“Although manufacturing operating conditions improved again in September, the rate of growth was marginal, continuing a slowdown that has been evident throughout the third quarter of the year,” said Paul Smith, Economics Director at S&P Global Market Intelligence.

Amidst growing client hesitancy—partly due to geopolitical and macroeconomic uncertainties—sales rose at a softer pace, prompting firms to take a more cautious approach to decision-making. With confidence plunging to its lowest level in nearly a year, manufacturers aimed to limit expenses and focus on productivity improvements, leading to job cuts in the sector for the first time in three months.

Despite this, market demand improved both domestically and internationally. The new export business, which rose for the fourth consecutive month, was supported by stronger sales to European and North American markets.

Survey participants expressed concerns about the underlying strength of the global economy, leading to hesitancy in decision-making. As a result, firms were highly reluctant to replace departing workers, opting instead to reduce labour costs or enhance productivity.

Employment numbers dropped in September for the first time in three months. Although modest, the rate of contraction was the steepest in nearly a year, while the backlog of work increased for the fifth consecutive month.

In response to the broader slowdown, purchasing activity weakened in September. Rather than acquiring new inputs, companies focused on existing inventories, which had been decreasing for the third consecutive month.

Delays in the delivery of ordered goods contributed to inventory reductions. The latest data revealed that average lead times lengthened for the fifth straight month, albeit to the least extent since May.

On a positive note, the latest price data indicated a noticeable slowdown in cost inflation to a five-month low. While raw material prices continued to rise, inflation was subdued by declines in the cost of goods such as steel. Additionally, there were signs of client pressure to offer price discounts.