Wed, Nov 28, 2007 - Page 11 News List

Economy report shows mixed picture

By Kevin Chen  /  STAFF REPORTER

A business climate index for manufacturers dropped last month while the reading for the service industry rose, a Taipei-based think tank said in a survey released yesterday, painting a mixed picture of the nation's economic health.

The business climate index for manufacturing industry last month fell 6.14 to 116.83 points, the lowest figure since April 2003, the Taiwan Institute of Economic Research (TIER, 台經院) said in a report.

Besides the lowest reading for the month in the last four-and-a-half years, manufacturers were also holding a conservative outlook for next year, the report showed.

Based on the institute's survey of local manufacturers last month, those who viewed the economy optimistically for the next six months dropped to 14.3 percent from 25.1 percent when the same survey was conducted in September.

About 23.3 percent of respondents said they were pessimistic about the economy, up from 18.1 percent in the previous month, while 62.4 percent believed the economy would neither improve nor worsen during the next six months, up from 56.8 percent the previous month, the report said.

The institute attributed the manufacturers' becoming more bearish about the economic outlook to concerns about rising raw material prices as well as worries about an economic slowdown in the US tied to subprime mortgage problems, the report said.

Yesterday's report, however, showed the business climate index for the service sector had risen by 0.44 points to 115.39 points last month.

While local brokerage houses were still hit by stock market volatility in the wake of the US credit crunch, and wholesale businesses saw profit erosion due to persistently higher raw material prices, other segments in the service sector remained relatively optimistic, the institute said.

The service sector should maintain steady growth in the months ahead, given improvements on both price and employment fronts, as well as progress in domestic tourism, it said.

With ample liquidity in the nation's banking system and the concern over inflationary pressure, the central bank may continue adjusting its interest rates next month, the institute's president David Hong (洪德生) said in the report.

The central bank has raised its benchmark rates for its 13th quarterly hike since October 2004, after raising the discount rate to 3.25 percent in September.

As for the NT dollar, Hong said it would stabilize in the short term while fluctuating within a narrow trading range against the US dollar, in view of foreign inflows into Asia for better investment return and the revaluation of the yuan.

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