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Manufacturers becoming pessimistic: TIER report

Local manufacturers were pessimistic about the economy last month due to declining orders, pressing the manufacturing climate index down to a level as not seen since the SARS outbreak in 2003, according to a survey released by the Taiwan Institute of Economic Research (TIER, 台經院) yesterday.

The survey showed that manufacturers that were optimistic about the economy dropped to 12.3 percent last month from 31.7 percent in March, while those who were pessimistic shot to 42 percent from 7.3 percent. As a result, the manufacturing climate index slipped by 3.51 points to 96.65 points last month.

"The index is similar to what it was when SARS hit the nation in 2003," said Chen Miao (陳淼), a researcher at the TIER.

The research institution attributed the decline to sinking orders, which further drove down prices and company margins.

But the good news is that, for the next six months, manufacturers said they are positive about seasonal demand. According to the same survey, 27.5 percent of the polled said they believe the economy will improve, up from 16.5 percent in the previous poll, and 17.6 percent said the economy will slow down, dropping from 26.5 percent.

Affected by rising oil prices that led to a global economic slowdown, Taiwan's export orders rose 15.4 percent to US$20.8 billion last month, the smallest gain since November 2003, the Directorate General of Budget, Accounting and Statistics said Tuesday.

The sluggish exports also made the government lower its forecast for economic growth to 3.63 percent from 4.21 percent it made in February. But TIER will maintain its GDP forecast unchanged for the nation at this point, said David Hong (洪德生), the research institute's president.

The institute revised its GDP prediction this year to 4.41 percent last month, slightly down from the 4.62 percent forecast it made in January.

To stimulate the economy, Premier Frank Hsieh (謝長廷) announced a slew of measures last week, including budgeting NT$200 billion (US$6.4 billion) for loans to small and medium-sized enterprises, and offering NT$300 billion government-backed preferential mortgages for first-time homebuyers.

Following in the footsteps of US Federal Reserve that raised the benchmark federal funds rate for the eighth successive time, by 25 basis points to 3 percent earlier this month, the nation's central bank is likely to raise its rediscount rates, currently stands at 1.875 percent, to narrow the rate spread next month, Chen said.

As for foreign exchange rate, Chen said trading of New Taiwan dollar will remain stable against the US dollar under the close watch of the central bank.
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