Retail sales have thus far held up well, despite manufacturing activity showing signs of weakening, but analysts have said that private consumption might soften in the near term, which could see the government introduce more incentives to boost domestic demand.
Revenue in the retail sector last month rose 1.9 percent after edging up 0.4 percent the previous month, while the food and beverage sector’s revenue rose 6.2 percent from a year earlier following a 3.9 percent rise the previous month, the Ministry of Economic Affairs reported on Wednesday last week.
For the whole of last year, the retail sector reported a 3.2 percent increase to NT$4.28 trillion (US$138.8 million), the largest annual increase in four years, the ministry’s data showed.
The food and beverage sector’s revenue also rose 4.6 percent last year, to NT$473.1 billion, the highest in seven years, the data showed.
In contrast, the manufacturing purchasing managers’ index (PMI) has been below 50 — the threshold that separates expansion from contraction — since November last year, and export orders last month fell 10.5 percent annually, compared with a 2.1 percent decline a month earlier, data released by the Chung-Hua Institution for Economic Research (中華經濟研究院) and the ministry showed.
DBS Bank Ltd (星展銀行) on Jan. 15 said that Taiwan’s export-oriented manufacturing sector faces multiple challenges in the near term, posing downside risks for the bank’s GDP growth forecast of 2.2 percent for this year.
Respondents in a Cathay Financial Holding Co (國泰金控) survey released on Monday last week said they were less willing to buy durable goods and big-ticket items this month, compared with last month, due to having less confidence in the economy and job market.
“We believe the weakening manufacturing activity led by increasing uncertainty over the export market might result in delays of regular salary increases, which was seen in a previous downcycle from May 2015 to March 2016,” Yuanta Securities Investment Consulting Co (元大投顧) consumer industry researcher Juliette Liu (劉珮昀) said in a report on Thursday.
“This might weigh on the domestic consumption market. From our observations, retail sales tend to lag behind leading indicators such as PMI by about three months,” Liu said.
The Executive Yuan on Jan. 10 announced plans to boost domestic consumption, including tax cuts for the working class, travel subsidies for domestic tourism, and the promotion of the MICE — meetings, incentives, conventions and exhibits — industry, in a bid to pre-empt further issues on the domestic front.
The ministry last week also announced subsidies to encourage purchases of energy-saving products, such as energy-efficient home appliances and electric motorcycles, which could contribute NT$5 billion and NT$1.5 billion respectively to consumer spending.
Liu said that the government might provide more support if the export-reliant industry continues to face headwinds.
“However, the upcoming incentive policy, if any, would more likely be a one-time stimulus for the purpose of improving sentiment,” she said.
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