Manufacturing confidence improved last month as local businesses reported better operations, but the long-term outlook turned pessimistic as US-China trade tensions showed no signs of abating, the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) said yesterday.
The Taipei-based institute’s manufacturing sentiment index came in at 95.3, an increase of 2.23 points from June, after 30.8 percent of firms reported an improvement in business, while 24.8 percent said they experienced a decline in business, according to its monthly survey.
TIER president Chang Chien-yi (張建一) attributed the upturn to inventory demand by local firms in the supply chains of international technology brands that are due to release new-generation products next month.
The high season usually spans the entire second half of the year.
A number of firms also benefited from order transfers to circumvent punitive tariffs imposed by Washington on Chinese goods, Chang said.
However, the US-China trade dispute cast a shadow over order visibility and companies have adopted a conservative attitude toward inventory-building, he said.
That explained why only 22 percent of companies said they were upbeat about the business outlook in the next six months, a drop of 3.3 percentage points from a month earlier, the survey showed.
Companies that held bleak views rose from 18.4 percent to 23.9 percent last month, it found.
The survey also found that the negative sentiment was most evident among manufacturers of textiles, leather and transportation products, many of which said they expect business to deteriorate.
Taiwan’s export-dependent economy cannot stay clear of the trade dispute as the US and China, the two largest trade partners, increasingly lean on a scorched-earth policy, Chang said.
China on Friday announced tariff hikes on US$75 billion of US products.
US President Donald Trump responded by heaping an additional 5 percent duty on US$550 billion of targeted Chinese goods, while ordering US companies to start looking for alternatives to China.
As the government has offered assorted incentives for Taiwanese companies in China to move back home, related agencies must take a careful inventory of capacity to be added and address the potential shortage of land and electricity so that Taiwan can genuinely benefit from the trade dispute, Chang said.
The institute also reported that business sentiment for the service sector weakened 0.3 points to 92.05 last month, while the gauge for the construction industry gained 0.97 points to 97.83 ,as some developers wrapped up construction last month to avoid the lunar Ghost Month, which fell in August this year, it added.
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