Business sentiment among manufacturers weakens slightly

Taipei, Aug. 26 (CNA) Business sentiment in the local manufacturing sector weakened slightly in July amid an uneven recovery, with the tech sector improving and the old economy sector still showing signs of fragility, the Taiwan Institute of Economic Research (TIER) said Monday.

TIER's composite index gauging business sentiment among local manufacturers, fell 0.06 points from a month earlier to 99.00 in July, according to the economic think tank.

In the service sector, a similar composite index increased 0.01 from a month earlier to 99.10 in July, and another composite index assessing business sentiment in the construction industry dropped 1.03 from June to 111.96, stopping a three-month rising steak, TIER said.

Speaking with reporters, TIER Economic Forecasting Center Director Gordon Sun (孫明德) said while Taiwan enjoyed export growth, it was unevenly distributed.

In July, Taiwan's exports grew 3.1 percent from a year earlier to US$39.94 billion with growth moderating from 23.5 percent in June.

Sun said the tech sector steamed ahead led by robust growth in artificial intelligence (AI) server and semiconductor-related industries amid a global AI boom, but old economy industries still came under pressure in the wake of a supply glut in China and the depreciation of the Japanese yen, which capped the entire growth in the month.

In addition, outbound sales from Taiwan to the U.S. market soared 62.2 percent from a year earlier in the first seven months of this year after a 70.3 percent year-on-year increase in July.

Despite a strong showing in exports to the U.S. market, Sun said Taiwan should stay alert to the upcoming presidential vote in Washington.

He added that if Republican candidate Donald Trump wins in November, he could introduce measures unfavorable to Taiwanese exporters.

Citing a survey conducted in July, TIER said 21.7 percent of the correspondents in the local manufacturing sector said their businesses improved in the month, compared with 14.9 percent in a similar poll in June, while 24.7 percent of them said their businesses deteriorated in July, compared with 26.9 percent in June.

In the July survey, TIER said, 26.7 percent of the respondents said their operations will improve over the next six months, down from 37.4 percent in June, while 21.1 percent of them said their operations will deteriorate over the next six months, compared with 18.2 percent in June.

As for the service sector, TIER said the local tourism industry failed to see a spike in tourists during the summer vacation, while Typhoon Gaemi interrupted the operations of shopping malls in July and compromised local retail sales.

Retailers, however, remained upbeat about their operations over the next six months, TIER said.

Meanwhile, TIER said the efforts made by the government to push for public work projects continued to lend support to the local construction industry.

However, TIER added, with the banking sector tightening lending to home buyers and the stock market facing volatility, many home buyers are more cautious about the local property market.

Commenting on the local property market, Liu Pei-chen (劉佩真), a researcher at TIER's Taiwan Industry Economics Database, said to rein in rising home prices, the local central bank could introduce a new round of selective credit control in the next quarterly policymaking meeting scheduled for mid-September.

In the June meeting, the central bank unveiled its sixth round of selective credit control by lowering the loan-to-value ratio, which is the ratio of mortgages to the value of an individual's second home, in certain areas from 70 percent to 60 percent, as a further measure to rein in manipulation in the property market.

The affected areas were the six largest cities -- Taipei, New Taipei, Taoyuan, Taichung, Tainan and Kaohsiung -- as well as Hsinchu City and Hsinchu County, the eight major property markets in Taiwan.