The HSBC manufacturing purchasing managers' index for Taiwan edged up to 48.9 points in January 2012, suggesting the nation’s business conditions were in contraction for the eighth consecutive month.

The PMI is a leading gauge of manufacturing industry health, where a value above 50 points indicates expansion, while a reading below 50 suggests a contraction.

Ms Donna Kwok economist at HSBC said in the monthly report that the latest PMI reading, while edging closer to the neutral mark compared with 47.1 in December 2011, pointed to sustained weak external demand that is likely to strain Taiwan's export oriented economy going forward. She added that "Taiwan's manufacturers are still struggling, but the deterioration of operational conditions is stabilizing."

She said that however, it is too early to declare the nation immune from faltering European demand until the impacts of the Lunar New Year holiday and Thailand's floods fade. New incoming business flows from local and foreign buyers were still contracting, with the new orders sub index at 47.4 last month, up from 44.3 one month earlier.

The report said that the new export orders sub index climbed to 46.9 last month from 42.8 in December, probably as a result of Lunar New Year holiday demand at home and from China.

Meanwhile, destocking eased further last month and the sub index on stocks of finished goods inched up from 47.6 to 48.1, while the reading on purchase stocks improved from 46.5 to 48.2.

(Sourced from www.taipeitimes.com)