Taiwan's manufacturing sector improves in September: TIER

Taipei, Nov. 1 (CNA) Taiwan's manufacturing sector showed signs of improving and came out of the previous contraction mode in September as emerging technologies continued to benefit high-tech industries, while global year-end peak season effects boosted demand, lifting some old economy industries, according to the Taiwan Institute of Economic Research (TIER).

Data compiled by TIER, one of the leading economic think tanks in the country, indicated the composite index, which gauges the manufacturing sector's health, rose 1.49 points from a month earlier to 11.06 in September, flashing a "yellow-blue" light, improving to sluggish growth from contraction or a "blue" light.

The September figure ended a four-month streak of contraction and hit a high since April, when the index stood at 11.85, according to TIER.

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 of the September index, the subindexes on the general business climate, demand, pricing, and purchases of raw materials moved higher by 0.68, 0.43, 0.38, and 0.08, respectively, from a month earlier in September, TIER said. But the subindex on costs moved lower by 0.08, TIER added.

The think tank said the local tech sector continued to ride the waves of artificial intelligence applications and higher demand for consumer electronics gadgets to steam ahead, the think tank said.

The think tank added that the local old economy sector benefited from the traditional year-end buying spree, which prompted foreign clients to build up inventories, helping them post a year-on-year increase in exports.

In addition, a weaker Taiwan dollar against the U.S. dollar and a rate cut cycle by the U.S. Federal Reserve made the local manufacturing sector more upbeat about their business operations in September and over the next six months, TIER said.

The electronics component showed a sluggishness mode or a yellow-red light in September, compared to a stable green light in August as its exports and industrial production soared more than 20 percent from a year earlier due to an AI boom and an increase in inventories in preparation for year-end demand, the think tank said.

The computer and optoelectronics industry also got a boost from AI applications and cloud services, flashing a warming yellow-red light in September, an upgrade from a sluggish yellow-blue light in August, the think tank added.

TIER said the machinery industries flashed a sluggish yellow-blue light in September, up from a blue light or contraction in August as semiconductor firms continued to expand their capacity, raising demand for production and automation equipment.

The chemical industry, however, continued to flash a blue light or stayed in contraction mode in September as weakening demand from auto and textile clients offset increasing demand from special chemical products from semiconductor clients, TIER said.

According to TIER, the local tech sector, the backbone of Taiwan's exports, is expected to continue to lend support to the domestic economy on the back of AI development and higher consumer electronics devices as the year is coming to an end, while the old economy sector is expected to recover during a year-end peak season.

But the local economy remained haunted by the U.S. tariff policies as no final deal has been reached between Washington and Taipei, TIER said, advising Taiwanese manufacturers to remain alert over uncertainties.