Taiwan’s manufacturing sector contracted for the fourth consecutive month in October amid weakening global demand, according to a survey of purchasing managers released by the Chung-Hua Institution for Economic Research (CIER) Tuesday.
Taiwan’s seasonally adjusted Purchasing Managers’ Index (PMI), which polls the health of the manufacturing sector, rose slightly by 0.5 points in October from a month earlier to reach 45.4, according to data compiled by the CIER, one of the country’s leading economic think tanks.
Of note, among the factors driving the contraction in the October PMI, the subindex for the business outlook over the next six months dropped by 3.5 points from a previous record low in September of 24.8.
CIER President Chang Chuang-chang (張傳章) said at a press conference that local manufacturers were conservative about the industry’s outlook.
Chang attributed this to several factors, including slack consumer demand in a peak season and the weakening of end-market demand due to China’s zero-COVID policy.
In addition, Chang said that capital chain rupture and the burden of soaring costs on small- and medium-sized enterprises also had an impact.
According to CIER Vice President Wang Jiann-chyuan (王健全), Taiwan’s economy outperformed most others in the world amid the COVID-19 crisis over the past two years when the manufacturing sector had accumulated a lot of inventory.
However, Wang said this had become a “winner’s curse,” with destocking now a common issue.
In addition, a decision by the United States to expand controls on exports to China of advanced chips made with American equipment last month could affect Taiwanese companies.
For example, China accounted for 10 percent of Taiwan Semiconductor Manufacturing Co.’s revenues in 2021, Wang noted.
Wang also suggested that Taiwan consider introducing its own version of the CHIPS Act to provide subsidies, tax incentives, and personnel training to expand next-generation chip manufacturing.
However, Chang said there was no need to be overly pessimistic about the future, noting that the subindex for new orders, a leading indicator to measure future demand and production requirements, had rebounded by 5.1 points to hit 42.8.
Meanwhile, the nonmanufacturing index (NMI), which covers service sector activity, stood at 50, dropping by 2.2 points from a month earlier and ending three consecutive months of expansion, according to CIER.
Chang indicated that factors such as the slowdown in the manufacturing industry and fluctuations in the financial market could affect the performance of related nonmanufacturing businesses.
In October, only the industries such as accommodation, food and beverage, and tourism that directly benefited from eased border controls experienced a month-over-month boost, according to CIER data.

Source: Focus Taiwan News Channel