The local manufacturing sector stayed in contraction mode for the fourth consecutive month last month amid continued weakness in global demand, the Taiwan Institute of Economic Research (TIER, 台經院) said yesterday.
Data compiled by TIER showed the composite index, which measures the fundamentals of the manufacturing sector, rose 0.36 points from a month earlier to 10.17 last month, but its business climate monitor remained “blue,” indicating contraction, because it was below the 10.5-point cutoff.
The think tank uses a five-tier system to assess economic activity in the sector, with “red” indicating overheating, “yellow-red” showing fast growth, “green” representing stable growth, “yellow-blue” signaling sluggish growth and “blue” indicating contraction.
Photo: CNA
As global consumption stayed weak, Taiwanese manufacturers saw a significant fall in the major indicators such as exports, export orders and industrial production, pushing down last month’s sub-index on purchases of raw materials by 0.09 from a month earlier, TIER said.
Last month, the sub-indexes on costs and demand also moved lower by 0.02 and 0.01 from May, while the sub-index on the general business climate bucked the downturn, rising 0.47 from a month earlier. In addition, the sub-index on pricing stayed unchanged.
TIER said the improvement in the general business climate came after a booming stock market amid hopes that the US Federal Reserve would pause its rate hike cycle in its policymaking meeting last month as well as a frenzy about the development of artificial intelligence.
However, the think tank said the rising popularity of AI applications failed to completely offset the impact from a global economic slowdown and inventory adjustments in supply chains worldwide.
As inflationary pressure remained and interest rates stayed high in the US and European markets, the local manufacturing sector remained under pressure, showing no immediate signs of recovery, the think tank said.
TIER’s survey found that 55.66 percent of respondents in the local manufacturing sector rated their business at “blue” last month, down from 65.78 percent in a similar poll conducted in May, while 37.05 percent rated their operations “yellow-blue,” compared with 20.86 percent in May.
In terms of individual industries, TIER said the electronic component industry remained “blue” for the seventh consecutive month last month as the industry saw production, exports and export orders falling more than 20 percent from a year earlier, resulting from continued inventory adjustments.
Due to weakening pricing power among steelmakers, the base metals industry remained “blue” for the 13th straight month last month, while solid demand for military products boosted prospects for the general business climate of the machinery industry, which was “green” for the third straight month last month.
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