Taiwanese manufacturers are expecting a decline in profit in the first half of next year, as inventory adjustments continue amid economic uncertainty and monetary tightening, among other downside risks, Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said on Thursday, based on the results of a semi-annual survey of purchasing managers regarding their business outlook.
The business prospect index registered at 38.1, as most firms expect operations to remain in contraction mode through the first half of next year, CIER president Chang Chuang-chang (張傳章) told a seminar in Taipei.
The purchasing managers’ index aims to gauge the health of the manufacturing industry, with values larger than 50 indicating expansion and values lower than the threshold suggesting contraction.
About 43 percent of the responding companies reported inventory-related losses, cash strains and price-cutting pressures this year, while 57 percent retained higher-than-normal inventories and 71 percent had postponed shipments, the survey showed.
About 59 percent had taken steps to motivate customers, it said.
A silver lining is that 68.4 percent of electronics suppliers are expecting an inventory glut to ease toward the end of the second quarter, Chang said.
National Development Council Deputy Minister Kao Shien-quey (高仙桂) told the seminar that the findings are “a light at the end of the tunnel.”
Exporters have seen business slumping in the past few months after COVID-19 stimulus measures began to disappear.
Drastic monetary tightening in advanced nations, China’s severe COVID-19 restrictions and the war in Ukraine have played havoc on global demand for Taiwan-made electronics this year, Kao said.
The employment index is expected to soften in the next six months, compared with the second half of this year, the poll showed.
Manufacturers also have a dim view about profit margins next year, with the profit measure dropping from 37.5 to 36, it showed.
Non-manufacturers should fare better in light of the operation index standing at 51.5, it showed.
A recovery from a downturn induced by virus restrictions should sustain local service providers through next year, CIER researcher Chen Shin-hui (陳馨蕙) said.
Taiwan’s loosening of COVID-19 controls raised the non-manufacturing business index by 9.4 points to 52.4 in the second half of this year, Chen said.
Despite business improvement, service providers said that profit margin is expected to stay in contraction at 47.2 due to mounting operating and personnel costs, the survey showed.
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