Taipei, The local manufacturing sector flashed a "yellow-blue" light in July, pointing to sluggish growth for the second consecutive month, but the index showed signs of improving, according to the Taiwan Institute of Economic Research (TIER).
TIER, one of the leading think tanks in Taiwan, said the composite index for the sector, rose 0.87 points from a month earlier to 11.84 in July, flashing a yellow-blue light in a range of 10.5 and 13.
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 trade friction between the United States and China, the two largest economies in the world, continued, it seemed the fundamentals of the local manufacturing sector have not felt too much of a pinch yet as the July composite index moved higher.
He said the higher July index also reflected optimism toward a peak season for the global high-tech industry for the second half of this year, which is expected to help local exports-oriented manufacturers secure more orders on the back of rising global demand.
In addition, raw material prices remained on the rise, which also boosted prices of products sold by Taiwanese exporters, Fang said.
The higher July score, Fang added, showed the local economy is recovering at a stable pace, with many manufacturers turning more upbeat about their operations and the overall business climate.
Out of the five factors of the composite index, only the sub-index for operating costs moved lower by 0.05 points from a month earlier, while the other four factors moved higher, TIER said.
TIER said the sub-indexes for demand, purchases of raw materials, the general business climate and pricing rose 0.50, 0.20, 0.11 and 0.10 points, respectively, from a moth earlier in July.
That month, the local semiconductor industry got a boost from peak season effects at a time when international brands were keen to launch new gadgets to meet demand, TIER said
However, the semiconductor business's growth was compromised by falling demand for devices used for cryptocurrency transactions, TIER said. As a result, the think tank said, the semiconductor industry only improved to flash a yellow-blue light in July from a blue light in June.
TIER said while international crude oil prices remained high, year-on-year price growth of oil- and coal-related products in July was capped by a higher comparison basis over the same period of last year so the local oil and coal industry flashed a green light, unchanged from June.
As for the local machinery industry, orders from buyers in China, the U.S. and Japan increased, helping the business flash a green light in July, improving from a yellow-blue light, TIER said.
Meanwhile, the base metal industry continued to flash a yellow blue light in July, but steel prices remained on the rise at a mild pace, TIER said.
Fang said the peak season effects in the second half of this year are expected to give a boost to the local manufacturing sector, but he urged manufacturers to remain alert over how trade disputes between Washington and Beijing will evolve.
Source: Focus Taiwan News Channel