Taipei--The local manufacturing sector flashed a "yellow-blue" light for the third consecutive month in May, signaling a sluggish performance that reflected a fall in raw material prices in the month, the Taiwan Institute of Economic Research (TIER) said on Friday.
TIER, one of the leading think tanks in Taiwan, said that falling raw material prices dragged the local wholesale price index (WPI) into negative territory, though growth in industrial production and export orders offset the drop in WPI to some extent.
As a result, the think tank said, the composite index for the manufacturing sector for May rose 0.33 points from a month earlier to 11.16, but the score remained within the yellow-blue category, which ranges from 10.5-13.0 points.
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 a contraction.
The May composite index for the manufacturing sector came after the local WPI fell 1.12 percent from a year earlier. However, export orders for the same month rose 9.1 percent year-on-year for the 10th consecutive month, and industrial production returned to year-on-year growth, up 0.78 percent on the back of solid global demand.
According to TIER, four of the five sub-indexes for the local manufacturing sector moved higher with the sub-index for pricing falling by 0.65 points from a month earlier.
The sub-indexes for raw material investments, operating costs, demand and business environment rose 0.50, 0.25, 0.19 and 0.02 points, respectively, from a month earlier, the think tank said.
Of the industries covered by the TIER survey, 40.20 percent said their business flashed blue in May, up from 34.22 percent in a similar survey in April, while 41.70 percent said their business flashed yellow-blue in May, down from 57.65 percent a month earlier.
In addition, the survey showed, 8.68 percent of polled firms said their business flashed green in May, up from 7.65 percent in April, while 9.42 percent said their business flashed yellow-red, up from 0.45 percent seen a month earlier.
TIER said that the electronic components industry benefited from a smooth inventory adjustment process among customers which boosted demand for high-end semiconductors in May. However, due to a relatively high comparison base in April, the industry still flashed yellow-blue in May, TIER added.
As for the metal industry, rising demand for steel products helped the industry flash green in May, compared with yellow-blue in April, the think tank said.
The machinery industry flashed yellow-blue in May, improving from blue a month earlier as demand for electronic production equipment rose, the think tank added.
The auto/auto parts industry continued to flash blue in May as car sales in the U.S. and China markets weakened, impacting auto component demand, while the petrochemical industry again flashed yellow-blue due to falling crude prices, TIER said.
Looking ahead, TIER said observers should watch the movement of international crude oil prices, the value of the Taiwan dollar and market reaction to the launch of the next generation iPhone, likely in September, as elements expected to impact the local manufacturing sector in the second half of this year.
Source: Focus Taiwan News Channel