Business climate gauges for the local manufacturing and service sectors both rebounded last month, an indication that Taiwan’s economic sentiment may bottom out in the second half of the year, the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) said yesterday.
However, the institute said whether the nation’s economy could stage a solid recovery would depend on how the two gauges perform over the next few months as well as other economic indicators such as export orders.
The latest survey conducted by the Taipei-based think tank showed that the business climate gauge for the manufacturing sector rose to 88.46 points last month, from a revised 87.7 points in June, bringing to an end a falling trend over the previous three months.
“The overall economy in the US, Europe and China did not deteriorate further, lowering the downside sentiment for the global economy and further raising local manufacturing firms’ attitudes on taking orders,” TIER president David Hong (洪德生) told a press confidence.
In the survey, 21 percent of manufacturers said they were optimistic about business confidence last month, up from 13.2 percent shown in the June survey, while 40.3 percent said they were pessimistic, compared with 42.9 percent in June.
Asked about business prospects for the next six months, 25.5 percent of respondents felt bullish, generally unchanged from 25.6 percent in the June poll, while those who felt bearish stood at 30.8 percent, down from 34.1 percent posted in June, the institute said in a press release.
A separate survey conducted by the institute showed the business climate gauge for the service sector rose 0.76 points from June to 88.46 points last month, the press release said.
Gordon Sun (孫明德), director of the institute’s macroeconomic forecasting center, said the results showed momentum on domestic demand has led the rebound.
However, the trend in the labor market over the near future would be an important indicator for the service sector’s sentiment, as mounting unemployment rate may drag down private consumption, Sun added.
Although various economic indicators showed Taiwan’s economy may have grounded between June and last month, it is too early to say the economy has started to rebound, Sun said.
“If the two gauges can continue to rise over the next few months, leading indicators such as export orders terminating the downturn trend, we will say the economy is highly likely to have bottomed and bounced back,” Sun said.
However, if US Federal Reserve further applies a third wave of bond buying, known as quantitative easing (QE3) measures, at its policy-making meeting next month, it may raise uncertainties for Taiwan’s economy and trigger inflation in Taiwan, he said.
Sun said the expansion of easing measures in the US may further raise prices for crude oil and food, forcing up local manufacturers’ import costs.
Earlier this month, the Directorate-General of Budget, Accounting and Statistics said it predicted the nation’s consumer prices would rise 1.93 percent this year, compared with its earlier projection of a 1.9 percent increase made last month.