The local manufacturing sector continued to demonstrate sluggish growth in July as rising inflation worldwide and worries over the U.S. and China economies have dented the confidence of many manufacturers, the Taiwan Institute of Economic Research (TIER) said Wednesday.
The composite index which measures the fundamentals of the manufacturing sector fell from 12.18 points from a month earlier to 11.88 in July, flashing a "yellow-blue light," which indicates sluggish growth, according to data compiled by TIER, one of Taiwan's leading think tanks.
It was the fifth consecutive month that the manufacturing sector has flashed a yellow-blue light.
The think tank uses a five-tier system to assess economic activity in a sector, with red indicating overheating, yellow-red showing fast growth, green representing stable growth, yellow-blue signaling sluggish growth, and blue indicating contraction.
Hawkish U.S. Fed, supply chain disruptions
TIER said inflation had triggered the major central banks in the world, in particular the U.S. Federal Reserve, to carry out rate hikes, which had created downside risks in the global economy, prompting many manufacturers to hold back on expanding.
China's zero tolerance policy towards COVID-19 also resulted in more interruptions in the global supply chain, TIER said.
As a result, due to an economic slowdown in the U.S. and China, the two major buyers of Taiwan-made goods, the local exports-oriented manufacturing sector saw global demand slow down and suffered a surprise decline in export orders in July.
In July, export orders in Taiwan fell by 1.9 percent from a year earlier, ending two months of year-on-year growth and missing a forecast of a 0.4-3.1 percent year-on-year increase.
Among the five components of the July composite index, the sub-indexes on demand, pricing and the general business climate moved lower by 0.58, 0.30, and 0.02 points, respectively, from a month earlier, while the sub-indexes on the purchases of raw materials and costs moved higher by 0.48 and 0.12 points, respectively, month-on-month, TIER said.
In the TIER survey, 60.20 percent of the respondents said their manufacturing businesses flashed a yellow-blue light in July, up from 38.15 percent in a similar poll conducted in June, while 17.93 percent said their operations flashed a blue light in July, compared with 24.97 percent in June.
Individual industries
As for individual industries, TIER said the electronics component industry kept flashing a yellow-blue light in July amid inventory adjustments, although international consumer electronics brands placed more orders ahead of the launch of new products.
The machinery industry flashed another yellow-blue light in July as rising interest rates led to a decline in global investments, while the base metal industry continued to flash a blue light amid concerns in the global steel market, TIER said.
TIER said the auto and auto parts industry flashed another yellow-blue light as inflation caused many potential car buyers to postpone their purchases.
Source: Focus Taiwan News Channel