Taipei:Taiwan's manufacturing sector experienced stable growth in August, indicated by a "green" light on the Taiwan Institute of Economic Research's (TIER) composite index. This marks a shift from July's "yellow-red" light as old economy industries encountered weaker demand.
According to Focus Taiwan, TIER reported that the composite index, which assesses the sector's overall health, decreased by 1.36 points from July's revised 17.32 to 15.96, placing it within the "green" light range of 13-16. This five-color system used by TIER ranges from "red" for booming conditions to "blue" for contraction.
The tech sector in Taiwan continued to thrive due to the global demand for AI and preparations by international brands for new product launches, boosting the country's exports. In contrast, older industries became more cautious with declining demand and clients hesitant to build inventories.
Of the five factors in the August index, only the subindex on costs rose by 0.03 points from the previous month. In contrast, the subindexes covering the general business climate, raw material purchases, demand, and pricing all saw declines.
Despite a rebound in the Taiex, Taiwan's stock exchange benchmark index, manufacturers remained cautious about future operations. An August survey indicated that 1.76% of respondents saw their business flashing a blue light, an increase from 0.28% in July, while 20.06% reported a yellow-blue light, up from 10.10%.
The textile industry showed a retreat to a "green" light from July's "yellow-red" due to ongoing weak demand, while the transportation industry remained at a "yellow-blue" light because of declining car sales and production adjustments. Conversely, the computer and optoelectronics sector maintained a "red" light, driven by robust AI demand and clients eager to increase inventories.
While AI-related opportunities are expected to bolster Taiwan's economy, TIER also highlighted several global uncertainties. These include potential military conflicts in the Middle East, rising crude oil prices elevating production costs, and inflation pressures that could lead central banks to increase interest rates.