Manufacturers conservative on industry outlook

Manufacturers have turned conservative on the industry outlook for the next six months, and on concern that the strengthening Chinese currency could squeeze their already slim margins, the Taiwan Institute of Economic Research (TIER, 台經院) said yesterday.

According to TIER's monthly survey released yesterday, the business climate last month appeared robust, with the index climbing to 107.78 points, up from 105.1 in July, as manufacturers received more orders and enjoyed rising profits.

However, respondetns' outlook for the business environment in the next six months seemed to tell a different story.

Up to 47.4 percent of manufacturers polled held a neutral view, a jump from 34.7 percent in the previous month, while those who were bullish made up 32.6 percent, down from 41.4 percent over the same time, the survey showed.

"The conservativeness was caused by the traditional low season coming in the first quarter of next year amid concern over possibly declining demand in major export markets, which falls within the time horizon of the survey," TIER vice president Kung Ming-hsin (龔明鑫) told a media briefing yesterday.

Worry over the appreciating Chinese yuan is another reason, Kung said, as this scenario would further dent the slim margins of companies that have established manufacturing bases in China.

The nation's political disputes did not have much of a negative impact on exports, although domestic consumption has been dealt a blow by the storm over bad consumer debt, the economist said.

Political issues cast a shadow over the local stock market, however, and weakened investor and consumer confidence, he added.

The business climate survey in the local service sector continued to fall to 118.36 points last month, down from 119.33 points in July, the survey showed.

When or how strong consumption will rebound is still unknown, Kung said.

In comparison, the nation's property sector escaped the negative impact of political turmoil in the first half of the year, according to another report TIER released yesterday on the outlook for the real-estate sector.

The housing market was supported by factors including the inauguration of a series of major transportation construction projects, such as the Hsuehshan Tunnel and the MRT's Tucheng (土城) line, and concern over rising inflation amid sky-high raw materials prices, TIER senior industry analyst Arisa Lui (劉佩真) said.

The property market is expected to stay stable in the second half of the year, but may encounter oversupply pressure next year, Liu added.

Housing prices in Taipei City, especially the popular Da-an and Nangang districts, will continue to rise in light of tight supply of land, while places in Taipei County like Tamsui (淡水) and Sanhsia (三峽) could see falling prices due to a supply glut, she said.

The analyst did not expect a property bubble in the near future, predicting that the market would remain stable until 2008.

However, Lui warned that the sector may see a rising downside risk if the relaxation of cross-strait policy did not come about as positively and quickly as expected.