Business sentiment among Taiwan’s manufacturers and service providers weakened significantly last month at a pace reminiscent of the global financial crisis in 2008, a local think tank said yesterday.
The trade war between the US and China scared firms in most sectors, with the sentiment gauge for the manufacturing industry falling to 88.35 last month, down 5.11 points from one month earlier to the worst in 77 months, the Taiwan Institute of Economic Research (TIER, 台經院) said.
The index has shed 13.11 percent over the past three months, a tumble that has only been seen during the global financial crisis, and it demands attention from the authorities, TIER economist Gordon Sun (孫明德) said.
“Unexpected risks might take the nation by surprise, like the results of Kaohsiung’s mayoral election on Saturday,” Sun told a news conference, referring to Chinese Nationalist Party (KMT) candidate Han Kuo-yu’s (韓國瑜) victory in the city.
Taiwan relies heavily on exports, and the US and China account for a combined 50 percent of the country’s outbound shipments.
Electronics exports have slowed down after the US and China imposed additional tariffs on bilateral trade in goods, Sun said.
Meanwhile, volatile crude oil prices have weighed on the sales of mineral, chemical and other non-technology products, he said.
Production costs have increased for local firms based in China, where authorities have tightened environmental protection requirements, TIER president Lin Chien-fu (林建甫) said.
Stringent business conditions in China could lead to repatriation of capital to Taiwan and the government should take steps to facilitate it, Lin said.
Only 7.2 percent of manufacturers are upbeat about their business prospects in the coming six months, while the number of pessimistic firms rose to 39.6 percent, TIER’s monthly survey found.
The outlook gauge for service-oriented firms softened by 4.75 points to 90.8 last month, the survey showed, suggesting that private consumption failed to lend support as a growth driver.
Firms involved in retail sales expect business to stay flat in the upcoming six months, while securities firms are looking at an improvement, even though they bore the brunt of capital outflows by global institutional investors, TIER said.
Sentiment in the real-estate sector gained 2.04 points to 97.19, as developers and builders sought to wrap up construction projects by the end of the year, TIER researcher Arisa Liu (劉佩真) said.
Housing transactions tend to pick up in the current quarter and the campaign pledge by some local administrators to improve the economy would help boost confidence, Liu said, citing a 11.7 percent gain in property transactions in the six special municipalities last month from September.
Economic fundamentals would decide the direction of the market now that the nine-in-one local elections are over, she said.
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