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Manufacturing sector stays sluggish but index improves

12/02/2023 09:22 PM
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Robotic arms are displayed in an exhibition in Taipei in this photo taken on Aug. 23, 2023. CNA file photo
Robotic arms are displayed in an exhibition in Taipei in this photo taken on Aug. 23, 2023. CNA file photo

Taipei, Dec. 2 (CNA) The local manufacturing sector remained in sluggish mode for the fourth consecutive month in October, but an index gauging the sector's conditions improved on the back of efforts to develop emerging technologies such as artificial intelligence, according to the Taiwan Institute of Economic Research (TIER).

Data compiled by TIER, one of the leading think tanks in Taiwan, showed the composite index, which assesses the health of the local manufacturing sector, rose 0.76 points from a month earlier to 11.59 in October, the highest level in about one and a half years.

It uses a five-tier system to assess economic activity in the sector, ranging from overheating, to fast growth, stable growth, sluggish growth and contraction.

TIER said weak global demand continued to affect the local exports-oriented manufacturing sector at a time of high inflation and aggressive rate hike cycles by the major central banks in the world, while escalating geopolitical tensions dealt another blow to the world economy.

In addition, TIER said, the local manufacturing sector also saw a relatively high comparison base over the same period, which pushed export growth into negative territory in October, when the country's outbound sales exports fell by 4.5 percent year-on-year to US$38.11 billion, after a brief 3.4 percent rebound in September.

However, the silver lining was that the growing popularity of emerging technologies including AI and cloud services, the debut of new tech gadgets and a year-end buying spree in the U.S. and European markets moderated the declines in Taiwan's export orders and industrial production in October, pushing up the October composite index.

Still, it was not at the higher end of the sluggishness category, ranging between 10.5 and 13 points, TIER said

In October, among the five factors in the composite index, TIER said, three showed signs of improving with the sub-indexes on the general business climate, demand and costs moving up by 1.01, 0.09 and 0.02, respectively, from a month earlier.

On the other hand, the sub-indexes on pricing and purchases of raw materials moved lower by 0.21 and 0.15, respectively, from a month earlier in October, TIER said.

Citing a survey conducted in October, TIER said 30.36 percent of the respondents in the manufacturing sector said their business was in contraction mode, down from 40.87 percent in a similar poll in September, while 41.92 percent of them said their business showed sluggish growth in October, compared with 50.22 percent in September.

In addition, 26.79 percent of the respondents said their business showed stable growth in October, up from 7.87 percent in September, TIER said.

During the month, the electronics component industry, the backbone of Taiwan's exports, continued to show sluggish growth amid lingering inventory adjustments, but the pure play foundry industry benefited from solid demand for AI and high performance computing (HPC) applications, which offset the impact from falling global demand, TIER said.

The chemical raw material industry, meanwhile, saw an increase in product prices in October due to a cut in production amid annual maintenance and a growing political crisis in the Middle East. That caused its business to show sluggish growth, improving from contraction in September, TIER said.

Looking ahead, TIER said, the global economy remained affected by uncertainties but the local information and communications industry has shown signs of stabilizing and exports could see momentum increase in the fourth quarter due to traditional peak season effects.

(By Pan Tzu-yu and Frances Huang)

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