Amid the sharper-than-expected global economic slowdown, Taiwan’s export-oriented manufacturing sector continued to show sluggish growth in September, the Taiwan Institute of Economic Research (TIER) said in a report Monday.
The composite index, which measures the fundamentals of the manufacturing sector, fell by 0.62 points from a month earlier to 10.53 in September, flashing a “yellow-blue” light, for the seventh consecutive month, signaling continued weakness in domestic manufacturing activity, data compiled by TIER, one of the leading economic think tanks in Taiwan, showed.
The score in September was the lowest since May 2020 and only 0.03 point higher than the blue light category of 10.5 points.
The think tank uses a five-tier system to assess economic activity in the sector, with red indicating overheating, yellow-red showing fast growth, green representing stable growth, yellow-blue signaling sluggish growth, and blue indicating contraction.
The index seeks to measure the health of the manufacturing industry by looking at five areas: demand, selling prices, production costs, raw material costs and operating environment.
TIER said that several events, such as hefty interest rate hikes by central banks in the United States and Europe aimed at combating inflation, the Russia-Ukraine standoff, and the impact of China’s zero-COVID policy on economic recovery, have caused global growth to slow more sharply than expected.
Earlier this month, the International Monetary Fund forecast global growth will slow from 6.0 percent in 2021 to 3.2 percent in 2022 and trimmed its 2023 global GDP growth forecast to 2.7 percent, 0.2 points down from its July forecast.
Amid the global economic slowdown, the industrial production and exports of Taiwan’s manufacturers in September ended 26 and 31 straight months of year-on-year growth respectively. In addition, export orders received by Taiwanese companies fell by over 3 percent year-on-year in September, the third drop this year. This adversely impacted the sub-indexes on demand and purchases of raw materials for production in the manufacturing sector, according to TIER.
Moreover, large interest rate hikes in the U.S. and Europe, weak global stock markets and de-stocking adjustments in the electronics industry caused manufacturers to downgrade their outlook for the future and dragged down the composite index for the local manufacturing sector, TIER added.
Looking forward, TIER indicated that movements of major economies such as the U.S., Europe and China should be observed, including whether the U.S. economy can maintain growth in the wake of the hawkish interest rate hikes by the Federal Reserve, political developments in China, and the impact on Chinese economic development of U.S. trade controls imposed on chip exports to China.
TIER noted that as most of Taiwan’s manufacturing companies are based in China, the future development of the Chinese economy must be closely watched because it will directly affect Taiwanese manufacturers.
Source: Focus Taiwan News Channel