The local manufacturing sector reported soft business in January as global demand remained weak, but holiday orders ahead of the Lunar New Year holiday helped ease the pace of decline, the Taiwan Institute of Economic Research (TIER, 台經院) said on Tuesday.
The composite index for the local manufacturing industry was “blue” for the third straight month in January at 9.72, compared with 9.74 in December last year, the Taipei-based think tank said.
The figures reflected a sluggish operating environment amid a global cyclical correction for technology products, it said.
Taiwan is home to the world’s largest suppliers of electronic parts used in smartphones, laptops, TVs and connected vehicles.
Local firms have taken a hit from disappointing smartphone sales and a US-China trade dispute.
However, rebounds in international crude oil prices and global bourses have left firms less pessimistic, TIER said.
The institute uses a five-color system to gauge manufacturing activity, with “blue” suggesting a recessionary state, “red” indicating overheating, “yellow-red” showing fast growth, “green” signaling stability and “yellow-blue” indicating a sluggish state.
The index seeks to measure the health of the industry by assessing five elements: demand, selling prices, production costs, raw material input and the operating environment.
The readings for operating environment, raw material input and selling prices made modest gains, but demand and production costs weakened further, the institute said.
The electronics sector fared slightly better at “yellow-blue,” as local semiconductor firms benefited from inventory-building demand ahead of the holiday, it said.
Holiday orders helped offset tepid smartphone sales and cooling demand for high-performance chips used in cryptocurrency mining, the institute said.
Some local firms moved shipments of electrical and machinery equipment from last month to January to avoid holiday disruptions, allowing machinery exports to register growth instead of a contraction, TIER said.
Firms involved in the supply of automotive parts saw negative cyclical movements, despite a modest monthly increase of 5.13 percent in new car sales to 44,142, it said, adding that a high base from a year earlier dragged on the sector.
Makers of petrochemical and plastic products reported poor sales due to a slowdown in demand for tires from China and increasing competition from rivals elsewhere, TIER said.
The decline in plastic product sales widened to double-digit percentage points, even though raw material prices stabilized, suggesting a continued challenge in the months ahead, it said.
Metal product makers also saw their business decline, mainly due to annual maintenance and tariffs levied by the US and China, it added.
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