Taiwan's official PMI fell in May to 53, the weakest in almost a year. Both output and new orders dropped below 50. With inventories remaining firm, the orders:inventories ratio deteriorated, indicating in the short term there continue to be downside risks for the headline PMI.
Overall, this is starting to shape up into something like a proper down cycle. The caveats are that first, respondents to the Markit PMI – which was even weaker in May, falling to 50 – attributed some of the softness last month to the Covid-19 lockdowns in China. Those restrictions are now being lifted. Second, producers continue to suffer from supply shortages, with delivery times remaining elevated.
It is conceivable that if the covid situation in China continues to improve, and if supply shortages get resolved, production in Taiwan could accelerate. But while Chinese growth is likely to improve in June, there aren't signs yet that the cycle there is about to gain real strength. At the same tine, the supply shortages have been a feature of the global cycle for many months now, and so it would be optimistic to assume they suddenly disappear.