Manufacturing sector contracts for 9th straight month

Taipei, Aug. 30 (CNA) At a time when trade tensions between the United States and China continue to affect global demand, Taiwan's export-oriented manufacturing sector remained in contraction mode in July, marking the ninth consecutive month of stagnation, the Taiwan Institute of Economic Research (TIER) said Friday

TIER, one of the leading economic think tanks in Taiwan, said the global economy remains roiled by uncertainty created by the trade disputes, with no sign of any immediate solution, which pushed down the index that measures the sector's business climate in July.

Data compiled by TIER showed the composite index for the manufacturing sector fell 0.31 points from a month earlier to 9.39, the second lowest level for the year after 9.18 in May. The July index flashed a "blue light", representing contraction, with a score at 10.5 points or lower.

The think tank uses a five-color system to describe economic activity, with red indicating overheating, yellow-red showing fast growth, green representing stable growth, yellow-blue signaling sluggish growth and blue reflecting contraction.

Out of the five factors in the composite index, two moved lower with three others moving higher in July, TIER said.

The sub-indexes for pricing and purchases of raw materials fell 0.53 and 0.12 points, respectively, from a month earlier in July, while the sub-indexes on demand, costs and the general business climate bucked the downturn, up 0.20, 0.10 and 0.04, respectively, from June, TIER added.

Meanwhile, 77.43 percent of manufacturers in TIER's monthly survey said their businesses flashed a blue light in July, up from 67.70 percent in a similar poll in June, while 19.25 percent flashed a yellow-blue light, down from 30.16 percent.

Another 3.32 percent of businesses flashed a green light in July, up from 1.42 percent in June, while none flashed a yellow-red or a red light, the survey found.

While the electronic components industry has entered its traditional peak season, global trade issues still capped demand from end users, so the industry flashed a blue light, TIER said, adding that the semiconductor segment is still undergoing inventory adjustments and flat panel makers continue to suffer a supply glut.

TIER said trade uncertainty has slowed the pace manufacturers are expanding so demand for production equipment remained weak in July, causing the local machinery industry to flash a blue light in July, compared with a yellow-blue light in June.

The think tank said the base metal industry flashed a blue light in the wake of weakening demand for steel products in July, while the local auto and auto part industry saw falling demand in China so the industry flashed a yellow-blue light despite an increase in car sales in Taiwan.

The think tank added that the local rubber and plastics industry continued to suffer a supply glut as China increased exports of rubber products in markets other than the U.S., so the industry flashed another blue light in July.

TIER researcher Fang Chun-teh (方俊德) told the press that although the manufacturing sector has been mired in contraction for nine months in a row, the think tank still has high hopes global demand for consumer electronics gadgets will increase in the second half of this year, boosting the shipments of Taiwanese suppliers.

In addition, with more Taiwanese investors operating overseas now willing to invest at home, and major semiconductor firms expected to dedicate more funds to upgrading technology processes, the local manufacturing sector is likely to turn stable for the rest of the year, Fang said.