Manufacturing activity contracts for 3rd straight month in August

Taipei, Sept. 1 (CNA) Taiwan's manufacturing activity contracted for a third consecutive month in August as local manufacturers remained cautious over its tariff talks with the United States and a possible levy on semiconductors imposed by Washington, the Chung-Hua Institution for Economic Research (CIER) said Monday.

Data compiled by CIER, one of the leading think tanks in Taiwan, showed the purchasing managers' index (PMI), which gauges the fundamentals of the manufacturing sector, fell by 0.1 percentage points from a month earlier to 47.9 percent in August.

In the service sector, the non-manufacturing index (NMI) also fell 2.1 from a month earlier to 50.7 in August. However, the data still indicated the sector remained in expansion mode for the sixth straight month.

PMI and NMI readings above 50 indicate expansion, while those below 50 show contraction.

Taiwan now faces a provisional 20 percent tariff from the U.S., which came into effect on Aug. 7, while the government said talks with the U.S. continue for a lower levy.

In addition, Washington launched a Section 232 investigation in April under the Trade Expansion Act of 1962, paving the way for potential tariffs on semiconductors

CIER said that amid uncertainties created by U.S. tariff policies, Taiwan's PMI weakened to the lowest in over a year.

Among the five major factors that make up the August PMI, the subindexes for supplier deliveries and inventories fell 2.9 and 0.8, respectively, from a month earlier to 50.1 and 47.8 in August, while the subindexes for new orders, production and employment rose 0.5, 0.9 and 1.7, respectively, from July to 45.9, 46.0 and 49.6, CIER data indicated.

The subindex on the business outlook over the next six months fell 0.7 percentage points from a month earlier to 37.6, marking the fifth straight month of contraction, CIER said.

Speaking with reporters, economist Kamhon Kan (簡錦漢) from the Academia Sinica said the local manufacturing sector received a boost from orders placed by buyers ahead of schedule in the first half of the year in an effort to avoid U.S. tariffs.

With the tariffs now in effect, Kan said, the impact on old economy industries and even tech firms rolling out products in mature processes has became more apparent, while other tech firms boasting high-end processes still benefited from artificial intelligence development.

After a U.S. federal appeals court ruled the "reciprocal" tariffs to be unlawful, President Donald Trump is to ask the Supreme Court to reverse the ruling, which has created even more uncertainty, Kan said.

The economist said that even if the Supreme Court upholds the appeals court's ruling, Trump could adopt other measures to push for his tariff policies.

The U.S. tariffs have squeezed foreign exporters' bottom lines, while higher product prices have hurt demand from American consumers, he added.

Among the six major industries, only the subindex for the chemical and biotech industry moved higher in August, while the subindexes for the other five -- the electronics and optoelectronics, food and textile, basic raw material, transportation equipment industries, and electricity and electric equipment industries -- trended lower from a month earlier, CIER said.

In terms of the NMI, the subindex on business outlook over the next six month fell 1.7 percentage points from July to 38.9 in August, marking the sixth consecutive month of contraction, CIER said.

CIER President Lien Hsien-ming (連賢明) said domestic demand weakened largely because many consumers postponed plans to buy a car as they were waiting for the tariff on cars shipped from the U.S. to be set.