Manufacturing sector stays stable for 5th straight month

Taipei, Oct. 5 (CNA) The local manufacturing sector remained stable for the fifth consecutive month in August with an index gauging the conditions of the sector flashing another "green light" due to solid global demand for artificial intelligence applications, according to the Taiwan Institute of Economic Research (TIER).

Data compiled by TIER, a leading economic think tank in Taiwan, showed the composite index assessing the manufacturing sector's fundamentals rose 0.29 points from a month earlier to 14.10 -- in the green light range of 13-16.

TIER uses a five-color system to assess economic activity in the sector, with "red" indicating overheating, "yellow-red" showing fast growth, "green" representing stable growth, "yellow-blue" signaling sluggish growth, and "blue" meaning contraction.

Among the five factors in the August index, three moved higher with the sub-indexes on purchases of raw materials, the general business climate and costs up 0.80, 0.13 and 0.13, respectively, from a month earlier, while the sub-indexes on pricing and demand fell 0.65 and 0.13, respectively, from July, TIER said.

TIER said pricing and demand in August were hit as global demand remained fragile and international crude oil prices declined. Meanwhile, Taiwan's tech industry got a boost from the efforts of international brands to unveil new products and peak season effects.

The think tank said the global economic recovery was still haunted by uncertainties, evidenced by the manufacturing activity in Japan remaining in contraction mode, the purchasing managers' index (PMI) in China weakening for the fifth consecutive month and Europe's PMI remaining flat.

In August, 17.08 percent of the respondents in a poll conducted by TIER said their business flashed a blue light, down from 29.19 percent in a similar survey conducted in July, while 28.98 percent said their operations flashed a yellow-blue light in August, up from 23.05 percent in July.

TIER said 20.04 percent of the respondents in August said their business flashed a green light, up from 9.36 percent in July, while 17.47 percent said their operations flashed a yellow-red light in August, down from 21.41 percent in July. About 16.43 percent of the respondents pointed to a red light in August, compared with 16.98 percent a month earlier.

By industries, TEIR said, the growing popularity of AI development and high-performance computing (HPC) devices and an increase of consumer electronics vendors rebuilding inventories in preparation for new product launches pushed up Taiwan's exports and industrial production. The local electronics component industry, therefore, flashed a yellow-red light for the third straight month in August.

Meanwhile, the computer and optoelectronics industry flashed a red light for the second consecutive month in August following an increase in shipments of servers and camera lenses used in mobile devices, TIER said.

TIER added that given semiconductor suppliers were keen to expand production of high-end processes to meet the demand for emerging technologies, the machinery industry flashed a yellow-red light for the third consecutive month in August.

TIER said the textile industry flashed another yellow-red light in August on the back of peak season effects and the Taiwan dollar's depreciation against the U.S. dollar.

The chemical and plastics/rubber industries flashed a yellow-blue light in August due to a supply glut in China and the suspension of preferential tariffs by Beijing, TIER added.

Looking ahead, the think tank said rate cuts engineered by the United States and China, the two biggest economies in the world, could add momentum to the global manufacturing sector, but that the pace of recovery remained uncertain.