Manufacturing sector flashes 'green' light in August

Taipei, Oct. 2 (CNA) Taiwan's manufacturing sector flashed a "green" light, indicating stable growth, in August, retreating from a "yellow-red" light in July, as old economy industries faced weaker end-user demand, the Taiwan Institute of Economic Research (TIER) said Friday.

The August TIER composite index, which gauges the manufacturing sector's overall health, fell 1.36 points from July's revised 17.32 to 15.96 in the green light range of 13-16 after a yellow-red light in July.

TIER uses a five-color system to assess activity: "red" for booming or overheating, "yellow-red" for fast growth, "green" for stable growth, "yellow-blue" for sluggish growth and "blue" for contraction.

TIER, one of Taiwan's leading think tanks, said the local tech sector continued to benefit from the global AI boom and the preparations of international brands ahead of the launch of new gadgets, which pushed up the country's exports.

However, TIER said, old economy industries largely turned cautious due to weaker demand and the reluctance of clients to build up inventories.

Of the five factors in the August index, only the subindex on costs moved higher by 0.03 from a month earlier. In contrast, the subindexes on the general business climate, purchases of raw materials, demand and pricing moved lower by 0.74, 0.8, 0.19 and 0.18, respectively, from July.

Despite the Taiex, the Taiwan Stock Exchange's benchmark index, rebounding in August, more and more manufacturers turned cautious about their operational outlook, TIER added.

Citing an August survey, TIER said 1.76 percent of respondents in the manufacturing sector thought their business flashed a blue light, up from 0.28 percent in a similar poll conducted in July, while 20.06 percent said operations flashed a yellow-blue light, up from 10.10 percent.

By industry, TIER said, the textile industry flashed a green light in August, retreating from a yellow-red light in July as end-user demand stayed weak, sending production lower, while the transportation industry continued to flash a yellow-blue light, due to falling car sales and production adjustments.

The computer and optoelectronics index flashed another red light in August as AI demand stayed robust with clients keen to build up inventories, boosting the industry's exports and production, TIER said.

Although business opportunities created by AI are expected to drive up Taiwan's economy, TIER also identified several uncertainties in the global economy. These include military conflict in the Middle East, an increase in crude oil prices, which is sending production costs higher for the business sector, and inflationary pressure that could prompt major central banks to raise rates, TIER said.