Taiwan's manufacturing sector shows sluggish growth in February

Taipei, March 31 (CNA) Taiwan's manufacturing sector showed sluggish growth in February, as export orders and industrial production lost some momentum, the Taiwan Institute of Economic Research (TIER) said Tuesday.

TIER's composite index, which measures the sector's overall health, fell 3.26 points from January to 11.55, flashing a "yellow-blue" light.

The institute uses a five-color system to gauge activity: "red" for overheating, "yellow-red" for rapid growth, "green" for stable growth, "yellow-blue" for sluggish growth, and "blue" for contraction.

Fewer working days in February due to the Lunar New Year holiday led to a noticeable slowdown in year-on-year growth for imports, exports, export orders, and production compared with January, which had shown stable growth, TIER said.

Furthermore, it added that the shorter working month weighed on manufacturers' revenue and increased pessimism about the business outlook, affecting business environment indicators.

Among the composite index's five components, raw-material purchases fell the most in February, dropping 1.66 points. Demand slipped 1.32 points, while business climate, cost, and pricing subindexes dipped 0.19, 0.06, and 0.04 points, respectively.

In the traditional sector, demand from the AI supply chain and rising copper prices boosted export orders for products such as sputtering targets, copper foil, and copper-clad laminates. However, the overall basic metals industry remained in contraction amid a weak global steel market.

In the electronics industry, computer, electronic components, and optical products sectors, as well as electronic parts, benefited from strong demand driven by AI, high-performance computing, and cloud services. However, the Lunar New Year holiday in February offset some gains in export orders and production, turning the light signals for both sectors from red to yellow-red.

Looking ahead, TIER said AI-driven growth in advanced semiconductors, advanced packaging, cloud equipment, and power devices is helping sustain the electronics and machinery sector.

However, conflicts in the Middle East and volatility in energy markets have significantly affected the global economic outlook, it explained, adding that rising energy prices are likely to boost inflation and slow growth.

Financial spillovers in global stock and bond markets add further pressure. Even if the crisis eases, restoring energy infrastructure in the Gulf will take time, keeping oil prices elevated.

TIER said that although AI-driven investment has helped offset some challenges, rising geopolitical risks could limit AI-driven momentum, and the effects of international developments and changes in global demand will continue to influence Taiwan's manufacturing sector.