Slowing growth in exports has dented sentiment among local manufacturers, with a key composite index for the manufacturing sector showing “yellow-blue” for the fourth straight month last month, the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) said yesterday.
The institute said in its monthly report that the headline composite index dropped to 10.93 points last month from the revised 11.26 points in June. The index gauges the state of the manufacturing sector in terms of market demand, selling prices, costs, production input and operation environment, according to TIER.
TIER uses a five-level scale to reflect the condition of the manufacturing sector: “Blue” implies a sluggish economy, “yellow-blue” represents a transitional stage between sluggish growth and steady development, “green” indicates a stable economy, and “yellow-red” means the economy is in the transitional stage between steady “green” and overheating “red.”
“More manufacturers have expressed weakening sentiment last month,” the report said, referring to those in the petrochemical and rubber segments, as well as those in the electronics and optoelectronics fields.
While both industrial production and export orders showed year-on-year increases for the first time last month after five consecutive months of contraction, their positive effects were offset by weak exports and imports, the report said.
Taiwan’s exports showed 1.91 percent growth last month from a year earlier, slowing from a year-on-year expansion of 8.72 percent in June, while imports declined by 7.37 percent last month from a year ago, according to the Ministry of Finance.
TIER said it expects certain industries, such as textile, leather and fur-making companies, to receive more orders in the second half of this year, but warned that the plan to raise electricity rates from October may put more cost pressures on manufacturers.
“It has added uncertainties to the sector over the future,” TIER said.
According to a report by Credit Suisse analysts Chung Hsu (許忠維) and Michelle Chou (周盈秀), the government’s electricity rate hikes would affect more manufacturers in the non-tech industries, such as cement, steel and industrial automation, than those in tech industries.
Domestic retailers such as food and beverage suppliers, convenience store operators, department stores and hotel operators will also feel the pinch of higher electricity rates, analysts said in a note yesterday.
Within tech industries, those in the printed circuit board and wafer foundry sectors will see more increased power costs than those in the chip design, PC hardware and handset sectors, according to Credit Suisse.
Additional reporting by Kevin Chen