Amid worries over downside risks in the global economy, business sentiment in the local manufacturing sector weakened further in July to hit the lowest point in more than two years, according to the Taiwan Institute of Economic Research (TIER).
Data compiled by TIER, one of the leading think tanks in Taiwan, showed that the composite index gauging the manufacturing sector’s business sentiment for July fell by 1.09 points from a month earlier to 87.91, the lowest level since May 2020, when the index stood at 86.03.
The July figure also marked the seventh consecutive month that the composite index had moved lower, the data indicated.
Bright spots
However, also in July, the composite index for the service sector stopped a three-month falling streak by rising by 2.55 from a month earlier to 96.41 in the wake of a recovery in domestic consumption amid eased COVID-19 concerns as well as subsidies introduced by the government to boost the tourism industry.
In addition, the composite index to gauge business sentiment in the construction industry rose by 3.84 from a month earlier to 96.74 in July as the industry sped up its pace to provide new homes before the peak season at year-end. In addition, TIER said an increase in public works also shored up the industry.
TIER President Chang Chien-yi (???) said inflationary pressure had affected global demand and the world’s economy after a spike in prices of raw materials, which prompted major central banks worldwide to tighten their monetary policies.
Weaker global demand
Chang said that demand for consumer electronics devices, such as smartphones and PCs, had weakened amid rising inflation and many international brands were adjusting their inventories, which has led to a fall in capacity utilization for the electronics sector in Taiwan.
Citing a survey, TIER said 16.8 percent of the polled manufacturers said their business improved in July, down from 20.5 percent in a similar poll in June, while 43.8 percent of them said their business deteriorated in July, compared with 42.7 percent in the June survey.
TIER said the chemical, steel, electronics, and machinery industries appeared more downbeat in July.
Over the next six months, TIER said, 20.1 percent of the respondents said they expected their business to improve in the July survey, compared with 18.5 percent in the June poll, while 39.4 percent said they anticipated that their business would deteriorate, compared with 36.4 percent in the June poll.
TIER said that except for the food and non-metal mineral industries, the manufacturing sector appeared cautious about the next six months.
Chipmakers, property developers
Liu Pei-chen (???), a researcher at TIER’s Taiwan Industry Economics Database, said the semiconductor industry, which is a significant part of the local economy, was faced with inventory adjustments.
Liu said many buyers of the semiconductor industry had scaled back their orders, sounding an alarm that the industry will see a worse second half than the first half of this year.
Commenting on the local property market, Liu said there was little room for home prices to move lower as property developers appeared reluctant to cut prices for the moment.
Rising construction costs caused by factors, such as higher land prices and a labor shortage, were also expected to contribute to maintaining home prices, he added.
Source: Focus Taiwan News Channel