Taipei, The local manufacturing sector showed signs of contraction for the third consecutive month in January as global demand declined, undermining Taiwan's export-oriented economy, the Taiwan Institute of Economic Research (TIER) said Tuesday.
The silver lining was that a recovery in domestic demand ahead of the Lunar New Year holiday starting on Feb. 2 helped minimize the impact of unfavorable external factors, TIER research fellow Fang Chun-teh told the press.
Fang added a rebound in international crude oil prices also prevented the index from falling further.
TIER, one of Taiwan's leading think tanks, said the composite index for the sector fell 0.02 points from a month earlier to 9.72 in January so it still registered a blue light, representing a level below 10.5, which indicates contraction.
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 reflecting contraction.
Of the five factors that make up the composite index, the sub-indexes on operating costs, demand and purchases of raw materials fell 0.01, 0.02 and 0.14, respectively, from a month earlier in January, TIER said.
The sub-indexes on pricing and the general business climate moved higher by 0.07 and 0.08, respectively from a month earlier in January, TIER said.
About 69.42 percent of manufacturers covered by a survey in the TIER report flashed a blue light in January, slightly down from 73.67 percent in a similar poll for December, while 27.30 percent flashed a yellow-blue light, up from 23.95 percent.
TIER said 3.28 percent flashed a green light, up from 2.38 percent in December.
The electronic components industry benefited from buying ahead of the Lunar New Year holiday to flash a yellow-blue light in January, compared with a blue light in December, TIER said.
The machinery industry continued to flash a yellow-blue light in the wake of falling demand from China caused by uncertainty over trade disputes between Washington and Beijing, TIER added.
The base metals industry flashed a blue light again in January as higher tariffs imposed by the U.S. prevented buyers from placing orders, while the auto/auto part industry saw rising competition from imported models to continue to flash a blue light, according to TIER.
Although the local manufacturing sector has flashed a blue light three months in a row, optimism over a possible deal struck by Washington and Beijing has left many optimistic, Fang said.
According to foreign news media, U.S.-China trade negotiations are in the "final stages" and the two sides could hold a summit in the U.S. at the end of March.
Source: Focus Taiwan News Channel