Business sentiment in Taiwan weakens for 4th straight month

Taipei, Oct. 26 (CNA) Business sentiment in Taiwan's manufacturing sector weakened for the fourth consecutive month in September, amid fragile global demand, but manufacturers were optimistic about the following six months, according to the Taiwan Institute of Economic Research (TIER).

The composite index, which gauges business sentiment among manufacturers, fell 1.73 points in September from a month earlier to 94.82, according to data released Friday by TIER, one of the leading economic think tanks in Taiwan.

The data also indicated that the service sector composite index dropped 4.77 points in September from the previous month to 91.43, recording the third straight monthly decline.

The construction industry composite index also fell month-on-month for the third consecutive month, dropping 6.22 percent to 101.21, the data showed.

TIER said the local manufacturing sector was affected by weak global demand, as well as by a supply glut in the chemical industry and low prices in the steel industry. The pinch was felt most in the old economy sector, which largely reported a decline in exports and industrial production in September, the think tank said.

However, the local manufacturing sector was upbeat about the business outlook for the following six months, as the world's major central banks loosened their monetary policies to stimulate demand, TIER said.

Citing a recent survey, TIER said 16.7 percent of Taiwan manufacturers saw an improvement in business in September, down from 19.3 percent in August, while 36.9 percent of them said business had deteriorated in September, up from 32.0 percent in August.

The September survey also indicated that 28.2 percent of manufacturers expected an improvement in business over the following six months, up from 20.3 percent in August, while 28.8 percent of them anticipated a fall in business, compared with 22.6 percent in August, TIER said.

Meanwhile, the service sector composite index fell in September, as the peak summer season and Ghost month ended, turning the retail, food/beverage and tourism industries downbeat about business, TIER said.

The outlook for the following six months was optimistic in the service sector, however, amid expectations of greater buying interest during the upcoming sports and art/cultural events in Taiwan, TIER said.

It said the composite index for the construction industry fell in September, as banks started to tighten lending to home buyers. Furthermore, the central bank's implementation of a sixth round of selective credit controls in the housing market in September complicated the situation for the construction industry, TIER said.

The government's measures to rein in high home prices are expected to further impact the housing market over the next six months, according to the think thank.