Taiwan’s manufacturing sector remains stable, but the index is declining

Taipei, July 1 (CNA) The local manufacturing sector remained stable in May, but an index measuring the sector’s health declined from the previous month amid uneven recovery across industries, the Taiwan Institute of Economic Research (TIER) said on Monday.

Data compiled by TIER, a leading think tank in Taiwan, showed a composite index assessing the fundamentals of Taiwan’s manufacturing sector fell 1.61 points from a month earlier to 13.33 in May, flashing another green light with a score between 13 and 16.

TIER uses a five-level rating system for economic activity, where red indicates overheating, yellow-red indicates rapid growth, green indicates steady growth, yellow-blue signals slowness and blue indicates contraction.

The advisory panel said that amid an uneven recovery in the global economy, manufacturing activity in the United States and China, the world’s two largest economies, has weakened.

The high-tech sector in the local export-oriented manufacturing sector has seen an increase in demand for new technologies, such as the development of artificial intelligence and cloud computing devices, but manufacturing in old economy sectors has largely failed to see a significant recovery.

Subindexes

In the May composite index, the sub-index for the overall business climate fell by 0.79 points from a month earlier, the steepest decline of the five index factors, while the sub-indexes for demand, raw material purchases and costs also fell by 0.75, 0.11 and 0.06 compared to a month earlier, TIER reported.

Defying the recession, the price sub-index increased by 0.09 compared to the previous month, TIER added.

Citing a survey, TIER said 20.96 percent of respondents in the local manufacturing sector said their company was glowing blue in May, up from 16.12 percent in a similar survey conducted in April, while 16.62 percent said their company was glowing yellow-blue in May, up from 15.93 percent in April.

TIER found that 36.88 percent of respondents said their business had a green light in May, up from 26.09 percent in April, while 20.47 percent said their business had a yellow-red light in May, up from 18.75 percent in April.

TIER reports that in May it was 5.07 percent. respondents said that their company had turned on the red light, while in April this percentage was 23.10%.

As more manufacturers are taking a cautious approach to their business prospects, it is not surprising that the business climate sub-index fell in May, TIER said.

Despite a surge in exports and export orders in May, economic growth showed signs of slowing, impacting demand and raw material purchases as, faced with expectations of higher international oil prices and freight rates, producers raised product prices, passing the financial burden on to customers, TIER added.

By industry

On the industry front, the electronics components sector turned yellow and red in May, up from red in April, as artificial intelligence applications and high-performance computing devices continued to boost demand for high-end wafer foundries, but mature process suppliers still faced high inventory levels, TIER said.

TIER added that the computer and optoelectronics industry turned yellow-red in May, compared to red in April, as slower export rates and production growth offset strong demand for artificial intelligence and cloud gadgets.

In the old economy, the plastics and rubber industry flashed a yellow-blue light in May and saw its rating downgraded from green in April after China lifted tariff concessions on plastic products made in Taiwan and Chinese petrochemical suppliers increased production to boost supplies, according to TIER.

Excess steel production from Chinese producers continued to weigh on the global steel market, causing the local base metals industry to record another positive sign in May, with more companies expressing pessimism about their business prospects, TIER said.

Moreover, the automotive and car parts industry continued to enjoy a good run in May – car sales decreased by 2.4%. compared to the previous year, and auto parts suppliers reduced production due to the slow pace of inventory changes in the US and European markets, TIER said.