Manufacturing sector in sluggish growth for 3rd straight month

Taipei, The local manufacturing sector remained in sluggish growth mode as an index gauging the sector's health flashed a "yellow-blue" light for the third consecutive month in August amid concerns over trade disputes between the United States and China, according to the Taiwan Institute of Economic Research (TIER).

TIER, one of Taiwan's leading think tanks, said the composite index for the sector fell 0.3 points from a month earlier to 12.14 in August, flashing a yellow-blue light.

The TIER uses a five-color light 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 reflecting a contraction.

Fang Chun-teh (???), a TIER economist, said while the electronics industry has entered a peak season in the third quarter, the August composite index still moved lower to point to sluggishness as the sentiment of local exports-oriented manufacturers was affected by rising global trade concerns.

In August, Washington imposed a 25 percent tariff on US$16 billion worth of Chinese goods after a 25 percent duty on US$34 billion worth of Chinese merchandise slapped in July.

In retaliation, China put a 25 percent tariff on US$16 billion-worth of U.S. goods in August, following a 25 percent duty on the same amount of exports from the U.S. a month earlier.

Even worse, there were no signs that the trade dispute would be resolved anytime soon.

Earlier this month, the U.S. imposed a 10 percent tariff on an additional US$200 billion worth of Chinese goods and the tariff is expected to rise to 25 percent by the end of this year. In response, China announced it would withdraw from trade talks with the U.S.

In addition to the global trade issue, Fang said production and export order growth of the local manufacturing sector was compromised in August to some extent by a relatively high comparison base over the same period of last year.

Out of the five factors of the composite index, three of the sub-indexes moved lower with the sub-indexes on demand, the general business climate and pricing down 0.32, 0.10 and 0.06 points, respectively, from a month earlier in August, TIER said.

However, the sub-indexes on purchases of raw materials and operating costs moved higher by 0.12 and 0.06 points, respectively, in August, TIER added.

While international smartphone brands launched new models in August, a higher comparison basis a year earlier led the local electronics component industry to continue to flash a yellow-blue light, TIER data showed.

In August, the base metal industry continued to flash a yellow-blue light in inflection of the impact resulting from the Washington-Beijing trade disputes, while the machinery industry kept flashing a green light on rising demand for automation equipment, the statistics indicated.

The local auto/auto part industry felt the pinch from the effect of the Ghost Month and witnessed a fall in car sales in August, so the industry flashed a blue light, a downgrade from a yellow-blue light in July.

Taiwanese consumers tend not to buy big-ticket items such as cars and homes during Ghost Month, the seventh month on the Chinese lunar calendar, which was during the Aug. 11-Sept. 9 period this year.

Source: Focus Taiwan News Channel