Taiwan's manufacturing sector stays stable but index falls

Taipei, July 1 (CNA) The local manufacturing sector stayed stable in May but an index gauging the state of the sector fell from a month earlier in the wake of an uneven recovery among industries, the Taiwan Institute of Economic Research (TIER) said Monday.

Data compiled by TIER, one of the leading think tanks in Taiwan, showed that the composite index, which evaluates the fundamentals of Taiwan's manufacturing sector, fell 1.61 points from a month earlier to 13.33 in May, flashing another "green" light with a score ranging from 13 to 16.

TIER uses a five-tier system to assess economic activity, with red indicating overheating, yellow-red showing fast growth, green representing stable growth, yellow-blue signaling sluggishness, and blue indicating contraction.

The think tank said with the global economy recovering erratically, manufacturing activity weakened in the United States and China, the top two economies in the world.

High tech industries in the local export-oriented manufacturing sector received a boost from strong demand for emerging technologies such as artificial intelligence development and cloud-based devices, but production of old economy industries still largely failed to stage a meaningful recovery.

Sub-indexes

In the May composite index, the sub-index on general business climate fell 0.79 points from a month earlier, the steepest fall among the five factors in the index, while the sub-indexes on demand, raw material purchases, and costs also moved lower by 0.75, 0.11 and 0.06 from a month earlier, TIER said.

Bucking the downturn, the sub-index on pricing rose 0.09 from a month earlier, TIER added.

Citing a survey, TIER said 20.96 percent of respondents in the local manufacturing sector said their business flashed a blue light in May, up from 16.12 percent in a similar poll in April, while 16.62 percent said their business flashed a yellow-blue light in May, up from 15.93 percent in April.

TIER said 36.88 percent of respondents said their business flashed a green light in May, up from 26.09 percent in April, while 20.47 percent indicated their business flashed a yellow-red light in May, up from 18.75 percent in April.

In May, 5.07 percent of respondents said their business flashed a red light, compared with 23.10 percent in April, TIER said.

As an increasing number of manufacturers turn cautious about the business outlook, it is no surprise that the sub-index on the business climate moved lower in May, TIER said.

Despite an increase in exports and export orders in May, growth showed signs of moderating, which affected demand and raw material purchases, as amid expectations of higher international crude oil prices and freight rates manufacturers raised product prices by passing on the financial burden to clients, TIER added.

By industry

In terms of industry, the electronic components industry flashed a yellow-red light in May, compared with a red light in April as AI applications and high performance computing devices continued to boost demand for high-end pure play wafer foundry business, but mature process providers still faced high inventories, TIER said.

The computer and optoelectronics industry flashed a yellow-red light in May, compared with a red light in April, as a slower pace in exports and production growth offset strong demand for AI and cloud gadgets, TIER added.

In the old economy sector, the plastics and rubber industry flashed a yellow-blue light in May, a downgrade from a green light in April, as China terminated tariff concessions for Taiwan-made plastics products and Chinese petrochemical suppliers raised their production to boost supplies, according to TIER.

A production glut by Chinese steel makers continued to impact the global steel market so the local base metal industry flashed another blue light in May with more and more companies downbeat about the business outlook, TIER said.

In addition, the auto and auto parts industry continued to flash a blue light in May, when car sales fell 2.4 percent from a year earlier and auto component suppliers scaled back their production due to the slow pace of inventory adjustments in the U.S. and European markets, TIER said.