Manufacturers' business sentiment improves for 6th straight month

Taipei, June 25 (CNA) Business sentiment in the local export-oriented manufacturing sector improved for the sixth consecutive month in May as emerging technologies stimulated global demand and boosted Taiwan's outbound sales, the Taiwan Institute of Economic Research (TIER) said Tuesday.

Data compiled by TIER, one of the leading think tanks in Taiwan, showed the composite index, which gauges business sentiment among local manufacturers, rose 1.07 points from a month earlier to 99.73 in May.

In the service sector, a similar composite index increased 1.69 from a month earlier to 97.44 in May, marking the third consecutive month of growth, while another index assessing business sentiment in the construction industry rose 2.89 to 110.05, the second straight month of growth, the TIER data indicated.

Although the global economy still faces uncertainties such as trade tensions between the United States and China and between Europe and China and national elections in many countries, including the presidential vote in the U.S., economic fundamentals worldwide remain on an uptrend, TIER Economic Forecasting Center Director Gordon Sun (孫明德) said at a news conference.

For Taiwan, exports rose 9 percent from a year earlier in the first five months of this year largely on the back of strong global demand for information and communications devices, high-end artificial intelligence servers and advances semiconductor processes in the current AI boom, Sun said.

Although the local high tech sector received a boost from AI development, the pace of recovery in other industries still appears unstable, he added.

Citing a survey, TIER said 24.5 percent of respondents in the manufacturing sector said their operations improved in May, slightly down from 24.9 percent in a similar poll conducted in April, while 18.3 percent said their operations deteriorated in May, slightly down from 18.9 percent in April.

The May survey found 28.2 percent of respondents expected their business to improve over the next six months, down from 35.0 percent in the April poll, while 16.7 percent said they expect their operations to deteriorate over the next six months, up from 9.9 percent in the April poll, according to TIER.

Fang Chun-te (方俊德), a TIER economist, told reporters that business sentiment in the electronics industry was mixed in May with firms boasting high end processes staying upbeat but those with mature processes more cautious.

Over the next six months the textile, steel, chemical and metal industries tended to be more conservative about their operations due to expected higher oil prices and freight rates which will raise operating costs, Fang said.

Echoing Fang, Sun said it is worth watching closely if these old economy industries stage a meaningful rebound in the second half of the year.

TIER has forecast Taiwan's gross domestic product (GDP) will grow 3.29 percent. As about 60 percent of employees work in the service sector as long as domestic demand remains solid, there is no need to worry about local economic growth, Sun said.

During the COVID-19 pandemic, domestic consumption continued to grow, but Taiwan needs to make more effort to attract foreign visitors as their spending in the country will further boost consumption, he added.

Commenting on the local property market, Liu Pei-chen (劉佩真), a researcher at TIER's Taiwan Industry Economics Database, said the central bank announced a sixth round of selective credit controls in the home market, but the market still enjoys some positive leads offsetting the central bank's move.

The positive factors include reconstruction needs in Hualien after a 7.2 magnitude earthquake rocked the county in eastern Taiwan in early April, with a designated government budget of more than NT$20 billion (US$616 million), Liu said.

In addition, as the government has budgeted almost NT$780 billion for public work projects in 2024, the construction industry has turned upbeat, Liu added.

In mid-June, the central bank launched its sixth round of selective credit controls by lowering the ratio of mortgages to the value of an individual's second home in certain areas from 70 percent to 60 percent to rein in manipulation in the property market.

The areas affected by the latest credit controls are Taipei, New Taipei, Taoyuan, Taichung, Tainan, Kaohsiung, Hsinchu City and Hsinchu County.

The measure could cap the amount of home transactions to some extent but home prices are expected to stay high, Liu said.