Wed, Jul 27, 2016 - Page 12 News List

IEK projects decline in manufacturing

CAUTIOUS OUTLOOK:While forecasting three consecutive quarters of declines, the researcher expects the manufacturing sector to return to growth in the fourth quarter

By Lisa Wang  /  Staff reporter

The manufacturing sector is expected to post a second year of decline this year, as a sputtering global economy and weak crude oil prices curtail demand for Taiwanese goods, the Industrial Economics and Knowledge Center (IEK) projected yesterday.

While forecasting three consecutive quarters of declines for this year, the center said that the manufacturing sector should return to growth in the fourth quarter — a quarter later than its previous estimate.

“The global economy is recovering at a slower pace than we expected. The IMF has cut its world economic growth forecast for this year and global financial market risks have risen” following the UK’s vote to leave the EU, IEK senior researcher Peter Cheng (陳志強) told a media briefing.

“We are still cautious about the second-half outlook, as we expect a fragile, L-shaped recovery,” Cheng said. “We have not seen any clear signs that would support an optimistic [outlook] for this year or even next year.”

The manufacturing sector would see revenue shrink by 0.18 percent year-on-year in the current quarter, before swinging to an annual growth of 0.75 percent next quarter, IEK projected.

For the full year, manufacturing revenue is expected to contract 1.71 percent to NT$17.44 trillion (US$543.2 billion) from last year’s NT$17.75 trillion, the center said.

Three months ago, IEK still believed that local manufacturers would eke out an annual growth of 0.11 percent this year.

The information and communication industry — the pillar of the nation’s manufacturing sector — remains a bright spot, with revenue projected to grow at an annual rate of 1.08 percent to NT$6.32 trillion, slower than the 1.34 percent growth the IEK estimated in April.

“Demand is weakening as new-generation electronic devices [smartphones] are not innovative enough to stimulate consumers’ appetite and the market is saturated,” Cheng said.

“Meanwhile, new applications and gadgets, such as self-driving vehicles, drones or AR [augmented reality] applications are not ready for commercial launch,” he said.

IEK yesterday trimmed its forecasts for all four major industries, with the petrochemical industry suffering the deepest cuts.

The petrochemical industry is expected to contract 3.3 percent annually to NT$4.27 trillion this year, IEK said, reversing a prior forecast growth of 2.25 percent.

The center blamed weak global crude oil prices behind the drastic cuts. IEK originally expected global crude oil prices to pick up from about US$40 per barrel in the second half after a 30 percent annual decline in the first half.

However, lower crude oil prices would benefit local refiners and boost their bottom lines, given lower import costs, it said.

The basic metal and machinery industry — the second-biggest contributor to manufacturing output — is expected to contract at an annual rate of 4.73 percent to NT$4.62 trillion this year, due to persistent oversupply, the IEK said.

The livelihood sector — including tourism — is forecast to edge up 0.2 percent this year to NT$2.23 trillion, compared with a prior estimate of 0.55 percent growth, as the number of Chinese visitors is expected to significantly drop amid cooling cross-strait relations, the center said.

This story has been viewed 2204 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top