Taipei, The local manufacturing sector remained in contraction mode for the eighth consecutive month in June, amid a global economic slowdown, with the index flashing another blue light, the Taiwan Institute of Economic Research (TIER) said Wednesday.
TIER, one of Taiwan's leading think tanks, said global demand has been affected by trade tensions, mainly between the United States and China, while a decline in raw material prices in the world market has also affected Taiwanese manufacturers.
According to TIER data, the composite index for the manufacturing sector rose 0.62 points in June from a month earlier to 9.80, the highest since January when it stood at 9.92 points.
However, as the index remained below 10.2 points, it continued to flash a blue light, signaling contraction for the eighth straight month.
The think tank 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.
Fang Chun-teh a researcher with TIER, told the press that while the local economy was hit by unfavorable external factors, the trade frictions between Washington and Beijing have prompted some Taiwanese companies in China to return home, which has boosted the domestic economy.
With inventory adjustments in the global semiconductor industry ending in June, Taiwan's exports began showing signs of rebounding, he said.
According to government statistics, Taiwan's exports grew 0.5 percent in June from a year earlier to US$28.39 billion, marking the first year-on-year increase in eight months.
Fang said the local manufacturing sector may climb out of the doldrums in the second half of the year, which is usually a peak season for the electronics sector, on the return of Taiwanese firms and a relatively low comparison base over the same period of last year.
Of the five factors in the composite index, only the sub-index for pricing moved lower in June, dropping 0.20 points from a month earlier, TIER said.
The sub-indexes for purchases of raw materials, the general business climate, demand, pricing and costs increased by 0.40, 0.23, 0.13 and 0.06, respectively, TIER said.
Meanwhile, 68.46 percent of manufacturers in TIER's monthly survey said their businesses flashed a blue light in June, down from 84.26 percent in a similar poll in May, while 27.26 percent flashed a yellow-blue light, up from 12.45 percent.
Another 4.29 percent of businesses flashed a green light in June, up from 3.29 percent in May, while none of them flashed a yellow-red light or a red light, the survey found.
TIER said the paper manufacturing sector continued to flash a blue light in June amid weakening demand from China, while the rubber and plastics sector also flashed a blue light again due to pricing pressure and a decline in orders from China.
In June, the base metal industry flashed a blue light in reflection of a fall in global demand and product prices, while the machinery industry flashed a yellow-blue light, improving from a blue light a month earlier, as the decline in exports slowed, TIER said.
In the electronics sector, a yellow-blue light was reported in June, compared with a blue light in May, as many contract notebook computer makers saw their shipments increasing.
The rush of orders for those products resulted from the U.S.' threat to impose a 25 percent tariff on another US$300 billion worth of Chinese goods, TIER said.
According to the think tank, the electronics industry has entered its peak season and is expected to flash a yellow blue light in the second half of the year and for the whole of 2019.
As for the auto/auto parts industry, it flashed a yellow-blue light in June, improving from a blue light in May, as car sales rose 1.08 percent from a month earlier, TIER said.
Source: Focus Taiwan News Channel