Manufacturing sector flashes first yellow-blue light in 15 months

Taiwan's manufacturing sector ended a 15-month contraction in July, but it is still too early to say whether the rebound will last, according to the Taiwan Institute of Economic Research (TIER).

TIER, a local economic think tank, released its composite index of the local manufacturing sector Wednesday, which showed a "yellow-blue light" for July after growing 0.77 points from a month earlier to 10.59 points.

TIER uses a five-color system to describe economic activity, with red indicating overheating, yellow-red showing fast growth, green representing stable growth, yellow-blue signaling sluggish growth and blue indicating contraction.

The yellow-blue light was the first significant uptick after the index saw 15 months of blue lights, thanks to improving performance in trade, according to TIER.

Although the global economic recovery remains weak, a rebound in demand for semiconductors has helped end a 15-month decline in exports witnessed in Taiwan, which also saw smaller drop in imports in July, TIER pointed out.

It is still too early to say whether the economy has rebounded based on the data of only one month, said Gordon Sun (???), director of TIER's Economic Forecasting Center.

Sun said Apple Inc. is expected to unveil new products in September, and if the company fails to impress the market and posts poor sales, this will hit exporters in Taiwan that rely on Apple- related business.

He also cited the European Union's toughened stance on the tax arrangements of American businesses shown in its ruling against Apple's corporate tax deal with Ireland, under which the company was ordered to pay back 13 billion euros (US$14.50 billion) in unpaid taxes, and the United Kingdom's exit from the EU as potential factors that may impact the economy of Europe, and subsequently that of Taiwan.

Oil prices, Sun said, are another key factor determining whether the global economy will stabilize in the second half of the year.

He said an ideal scenario for the global economic recovery is that the price level of oil stays at around US$50 per barrel, rather than fluctuating in a wide range.

Source: Focus Taiwan