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Manufacturing contraction continues for second month in December

02/06/2023 05:15 PM
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CNA file photo
CNA file photo

Taipei, Feb. 6 (CNA) The monitoring indicator for Taiwan's overall manufacturing industry in December 2022 flashed a "blue" light for the second straight month signaling contraction, due to manufacturing inventory reduction and sluggish global demand, the Taiwan Institute of Economic Research (TIER) said Monday.

The monthly composite index for the local manufacturing sector, which gauges the sector's fundamentals, fell by 0.24 points to 9.48 points in December, the lowest level since February 2020, according to the TIER, one of Taiwan's leading economic think tanks.

This performance put it in the "blue" light range on TIER's five-tier scale, under which "red" indicates overheating, "yellow-red" fast growth, "green" stable growth, "yellow-blue" sluggish growth, and "blue" contraction.

The downturn comes at a time when global economic growth is forecast to decelerate sharply due to high inflation, volatile financial markets and tightening monetary policy by major central banks around the world, which have dented end-user demand and pushed down the indicators for exports, industrial production and export orders, while affecting demand and pricing, TIER said.

However, China's relaxation of many COVID-19 restrictions in December has made local manufacturers more optimistic about the business outlook over the next six months, it added.

As a result, among the five factors that made up the December composite index, the sub-index for the general business climate moved higher by the most, 0.15, from a month earlier.

Meanwhile, the sub-indexes for purchases of raw materials and costs rose by 0.05 and 0.03, respectively, TIER said.

Bucking the upturn, the sub-indexes on demand and prices moved lower by 0.24, and 0.23, respectively, in December, compared to a month earlier, TIER added.

In December, a blue light flashed for 73.63 percent of industries in the local manufacturing sector, up from 59.04 percent from November, while no yellow-red or red lights flashed for any industry in December, according to the TIER.

The electronic parts and components sector recorded a blue light in December, down from yellow-blue the previous month.

This was caused by inventory adjustments and a decline in Taiwan's overall exports that lowered the sub-indexes for demand and general business climate, according to the TIER.

Looking ahead, the TIER said that global economic growth for 2023 is largely forecast to slow down, which could affect the performance of Taiwan's export-oriented manufacturing sector.

However, the lifting of China's zero-COVID policy in December could help the economy bounce back and boost Taiwan's manufacturing sector, although further observation is required, the TIER said.

(By Su Szu-yun and Evelyn Kao)


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