Taiwan manufacturing contracts for fourth straight month in August

Taipei, Oct. 1 (CNA) Taiwan's manufacturing sector recorded its fourth consecutive blue light in August, signaling continued contraction despite modest improvements in overall conditions, the Taiwan Institute of Economic Research (TIER) said Wednesday.

The composite index rose to 9.24 points, up 0.88 from July, supported by stronger technology shipments and orders, a weaker Taiwan dollar, and easing tariff impacts from the United States.

Traditional industries, however, continued to face weak demand and intense overseas competition, prompting many firms to scale back output or adjust production schedules. As a result, most sectors remained in the blue-light category.

TIER employs a five-color system to gauge economic activity: red for overheating, yellow-red for fast growth, green for stable growth, yellow-blue for sluggish growth and blue for contraction.

By sector, semiconductors benefited from robust AI-related demand and restocking of consumer electronics, lifting the industry's light from yellow-blue in July to green in August.

In contrast, the machinery sector stayed in the blue zone, as weak U.S., European and Southeast Asian markets dragged down orders and exports, offsetting gains from semiconductor equipment demand.

More than 60 percent of industries remained in decline, underscoring an uneven recovery across the manufacturing sector.

Looking ahead, TIER said Taiwan's outlook remains closely tied to developments in the U.S. and China.

In the U.S., tariff uncertainty is easing, though duties on semiconductors remain unresolved, while the Federal Reserve has signaled a cooling labor market and lingering inflationary pressure from tariffs.

In China, "anti-involution" measures and market support policies aimed at reducing cutthroat competition could help ease deflation risks, though their effectiveness in boosting consumer confidence and growth remains unclear.

TIER cautioned that global uncertainties continue to pose risks in the second half of 2025 and urged manufacturers to stay alert to potential challenges.