Gauges indicating the business climate for Taiwan’s service and manufacturing sectors fell last month because of economic uncertainties in the US and Europe, the Taiwan Institute of Economic Research (台灣經濟研究院) said yesterday.
The latest survey conducted by the Taipei-based think tank showed the business climate gauge for the service sector dropped 6.3 points from a month earlier to 99.43 points last month, its lowest level since June 2009.
“The stock market tumble led to the banking industry’s investment losses, further dragging down last month’s gauge for the service sector,” Chen Miao (陳淼), director of the institute’s macroeconomic forecasting center, told a media briefing.
The slowing revenue at local wholesale and retail businesses was the other factor dragging down the gauge, Chen said.
The TAIEX plummeted 10.44 percent last month, with revenue at listed state-owned banks down 25.92 percent from a month earlier, the institute said in a statement.
A separate survey conducted by the institute and released -yesterday showed the business climate gauge for the manufacturing sector fell to 95.35 points last month, down 1.11 points from a revised 95.46 points in July.
Respondents who felt bullish about business prospects in the near term dropped 16.8 percentage points to 21.1 percent last month, while those who felt neutral or bearish stood at 49.2 percent and 29.7 percent, from 42.6 percent and 19.5 percent respectively.
“More manufacturing companies felt upbeat on last month’s business sentiment, but they said they would maintain a conservative outlook for the next three to six months because of the first quarter next year — a weak season for them — is coming,” Chen said.
Although the two business climate gauges fell, indicating slowing business sentiment, Chen’s opinion went against that of the majority.
Chen said the central bank should raise rates again at its board meeting on Thursday amid the still strong fundamentals.
“Despite the recent weaker momentum on the stock market, the stable growth of money aggregates M1B and M2 have shown that capital is still abundant, which means the central bank still has some space for tightening,” he said.
In addition, the New Taiwan dollar’s recent depreciation against the US dollar may be the other -important reason for the central bank to raise interest rates, because this would raise the import prices on raw materials, further deepening the nation’s inflationary pressure, Chen said.
The NT dollar fell NT$0.184 to close at NT$30.572 against the US dollar in Taipei yesterday.
Chen said he expected the NT dollar to rebound in the fourth quarter as the recent depreciation was only the result of short-term volatility.
Moreover, US and European seasonal demand is likely to boost Taiwan’s manufacturing sector in the final quarter, which would then raise local business confidence and investment sentiment to push the value of the NT dollar higher, he added.
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