Manufacturing sector contracts for 2nd straight month

Taipei, June 8 (CNA) Taiwan's manufacturing sector in April remained in contraction mode as the climate gauge for the sector flashed a "blue light" for a second consecutive month, according to the Taiwan Institute of Economic Research (TIER), one of the country's leading economic think tanks, on Thursday.

Due to sluggish global end-market demand, TIER's composite index gauging business sentiment in the local manufacturing sector fell 0.35 points from a month earlier to 9.87 in April, the lowest since February when the index stood at 10.97, showing the manufacturing sector again contracted, the think tank said.

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.

Amid a global manufacturing downturn, the indicators for Taiwan's imports and exports, industrial production and export orders saw a double-digit fall in April year-on-year as many domestic manufacturers continued inventory adjustments because of weak global demand and a relatively high comparison base over the same period of last year, according to TIER.

TIER said the composite index's pricing sub index in April fell the most at 0.42 points from a month earlier, while the measurements for the general business climate and demand shed 0.23 and 0.01 points, respectively.

Bucking the downward trend, the purchasing and cost of raw materials sub indexes saw month-on-month increases in April of 0.17 and 0.14 points respectively.

As for individual industries, TIER said, the electronic components industry flashed a blue light for the fifth consecutive month in April due to a double-digit year-on-year fall in industrial production and exports at a time of weakening global demand and inventory adjustments in supply chains that affected the sub indexes for the purchase of raw materials and the general business climate.

In the machinery industry, the index flashed a green light, an improvement from yellow-blue over the previous five consecutive months as companies turned more optimistic about market outlook due to the strong showing of stocks in domestic defense companies.

Looking ahead, TIER said the U.S. and European economy are expected to stabilize due to the resolution of the U.S. debt ceiling crisis, the decline in consumer prices in the U.S. and Europe, and the expected ending in June of the rate hike cycle in the U.S.

However, China's slower-than-expected economic recovery in the post COVID-19 era and the grim forecast for 2023 revenue in Taiwan's semiconductor industry, which accounts for about 40 percent of Taiwan's exports, could adversely affect the manufacturing sector, TIER added.

The Industrial Technology Research Institute last month released its forecast that the production value of Taiwan's semiconductor industry this year will drop by 12.1 percent year-on-year to NT$4.24 trillion, a downward revision from its forecast 5.6 percent decline in February.