Local manufacturers' confidence in the economy slid last month, and their pessimism is likely to drag on for the next three to six months, according to a report released by the Taiwan Institute of Economic Research (TIER,
Among the manufacturers polled last month by TIER, only 33.5 percent said they thought the economy at that time was good, down from 40.2 percent in September. Meanwhile, 25 percent said the economy was bad, up from 15.6 percent the month before.
The results caused the manufacturing climate index to drop 3.82 points to 107.58, according to the report.
"The manufacturers showed more concern over rising costs, mostly added by high oil prices, which are eating into their profits," the report said.
Oil prices stayed above US$60 a barrel last month after hitting an all-time high of US$70.85 on Aug. 30 after Hurricane Katrina damaged US oil production in the Gulf of Mexico region. But prices have since fallen below US$60 per barrel, with light sweet crude for delivery in January closing at US$58.71 on Wednesday in New York.
The market will reopen on Monday after the long Thanksgiving holiday weekend.
Excess capacity and sagging sales prices after the peak season are also issues that worried manufacturers, according to the TIER report.
The sentiment was also seen in the service sector, as the business climate index in the sector declined 1.89 point to 112.8 last month, the report said.
Unstable oil prices will likely dampen manufacturers' outlook for the next three to six months, as only 12.4 percent of the respondents said they think the economic future looks rosy, down from 17.5 percent in the previous poll.
Those who believe the economy will decline in the near term increased to 23.9 percent from 21.3 percent, TIER said.
The consumer price index (CPI), an important measure of inflation, increased 2.62 percent last month from a year ago, but the figure was lower than September's 3.16 percent, mainly due to falling vegetable prices.
As consumer prices may be set to increase more rapidly, the central bank could hike interest rates further, TIER said.
The nation's central bank raised its benchmark interest rate for the fifth consecutive quarter in September to hold down inflationary pressure.
The bank increased its rediscount rate charged to commercial banks by 0.125 percentage point, to an almost four-year high of 2.125 percent.
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