Taipei: Business sentiment in Taiwan's manufacturing sector weakened in February, coinciding with the long Lunar New Year holiday, as seasonal effects took their toll, the Taiwan Institute of Economic Research (TIER) reported on Wednesday. Data from TIER, a leading Taiwanese think tank, indicated a decline in the composite index for the manufacturing sector, which measures business sentiment among local manufacturers. The index fell by 2.10 points from January to 96.41, halting a seven-month upward trend.
According to Focus Taiwan, Gordon Sun, director of TIER's Economic Forecasting Center, highlighted that the reduced number of workdays in February impacted exports and production. February saw a 20.60 percent rise in Taiwan's exports compared to the previous year, though this was a decrease from January's 69.90 percent increase. Manufacturing production in February dropped by 11.48 percent from the previous month, while year-on-year growth reached 19.64 percent.
A February survey cited by TIER revealed that only 9.7 percent of respondents believed their business improved that month, down from 25.1 percent in January. Conversely, 41.0 percent felt their business had deteriorated, an increase from 24.4 percent in the January poll. Looking ahead, 39.6 percent of respondents in February were optimistic about business improvement over the next six months, up from 25.8 percent in January, while 17.5 percent anticipated deterioration, a slight increase from the previous month.
Sun noted that many manufacturers remain optimistic about the next six months, anticipating that military conflicts in the Middle East would not persist. TIER President Chang Chien-yi pointed out that the U.S.-Israel conflict with Iran has disrupted global energy supplies and driven up international crude oil prices, potentially leading to inflation both domestically and internationally.
Chang further explained that even if the conflict concludes soon, oil prices might stabilize around US$100 per barrel, given the extensive damage to energy infrastructure in the Middle East. Sun added that if the conflict extends beyond mid-April, maintaining crude oil prices around US$140 per barrel, it could trigger an economic recession.
The report also noted a decline in the TIER's composite index for the service sector, which fell by 0.55 points to 94.55 in February, ending a four-month upward trend. The drop was attributed to reduced turnover in the local stock market, affecting brokerage incomes. Additionally, the composite index for the construction industry saw a sharp decline of 4.11 points to 95.81, reflecting decreased commercial and residential property transactions in Taiwan's six largest cities.