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Business sentiment among manufacturers improves slightly: Think tank

09/25/2023 04:34 PM
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CNA file photo
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Taipei, Sept. 25 (CNA) Sentiment among manufacturers toward their business operations improved slightly in August, but caution remained at a time when global demand from end-users stayed weak impacting the export-oriented manufacturing sector, the Taiwan Institute of Economic Research (TIER) said Monday.

Data compiled by the TIER, one of the leading economic think tanks in Taiwan, showed the composite index gauging business sentiment in the manufacturing sector rose 0.44 points from a month earlier to 91.92 in August, but the increase was capped, indicating caution was little changed from July.

As for the service sector, the composite index fell 2.99 points from a month earlier to 97.26 in August, ending a three-month rising streak, while the composite index in the construction industry rose 4.59 points from July to 103.36 in August, marking the third consecutive monthly increase, according to TIER.

TIER said petrochemical suppliers received a boost from a spike in international crude oil prices, seeing product prices stage a rebound in August and the steel industry also benefited from the higher price of steel items in the month so many firms in the old economy sector turned upbeat about their business.

However, as the tech sector, the backbone of Taiwan's exports, remains impacted by weakening demand for electronic gadgets and ongoing inventory adjustments, industries in the sector continued to stay alert over their operations, TIER said.

Speaking with reporters, Liu Pei-chen (劉佩真), a researcher at TIER's Taiwan Industry Economics Database, said the August composite index for the local manufacturing sector fluctuated in a small range in the wake of negative leads from the semiconductor industry, including a move by foreign brokerages to cut their forecasts for capital expenditure by Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmakers.

Among these cautious foreign securities houses, a U.S. brokerage lowered its forecast of TSMC's capex from an earlier estimate of US$28 billion to US$25 billion for 2024, which represents a 21 percent cut from 2023. However, it also raised TSMC's capex forecast from US$35 billion to US$36 billion in 2025.

Citing a survey targeting the local manufacturing sector, TIER said 20.7 percent of respondents indicated their business improved in August, up from 17.7 percent in a similar poll conducted in July, while 27.5 percent indicated their business worsened in August, down from 28.1 percent in July. The think tank said the chemical industry appeared more upbeat about its operations.

Over the next six months, 18.6 percent of respondent in the manufacturing sector in the August survey thought their business would improve, down from 23.7 percent in the July poll, while 25.0 percent expected their business to deteriorate in the August survey, up from 23.1 percent in the July poll, TIER said.

Commenting on the service sector, TIER said the fall in the composite index largely resulted from a fall in equity prices at home and abroad in August, which affected the performance of financial firms.

Foreign institutional investors registered net sales of more than NT$100 billion (US$3.13 billion) in August as the Taiex, the weighted index on the Taiwan Stock Exchange, fell 658.42 points, or 3.81 percent.

Gordon Sun (孫明德), director of TIER's Economic Forecasting Center said recent volatility in the stock market largely reflected fears over more rate hikes by the U.S. Federal Reserve.

Although the Fed left its key interest rates unchanged when its latest policymaking meeting wrapped up on Sept. 20, U.S. time, the American central bank made a hawkish statement, hinting interest rates would stay higher for longer.

While inflation in the U.S. market shows signs of moderating, there are growing fears that the U.S. economy will see inflation pick up again, prompting the Fed to further raise rates, creating uncertainty in the financial sector, Sun said.

Commenting on the increase in the composite index in the construction industry, Liu said buying in the home market was sparked by buyers for self-dwelling purposes, while investors also jumped into the property market to buy houses as a way of combating inflationary pressure.

However, Liu noted that non-economic factors relating to the upcoming presidential election slated for Jan. 13, 2024 could interrupt buying in the local property market, while the government could also continue to introduce measures to rein in home prices.

(By Pan Tzu-yu and Frances Huang)


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