Manufacturing sector remains sluggish but index improves

CNA file photo
CNA file photo

Taipei, Jan. 2 (CNA) The local manufacturing sector continued to flash a “yellow-blue” light, indicating sluggishness in November, but the index still improved month-on-month on the back of increased momentum in old economy industries, according to the Taiwan Institute of Economic Research (TIER).

TIER, one of the leading think tanks in Taiwan, said raw material prices are increasing following rising year-end global demand and a hike in international crude oil prices, propping up old economy manufacturers.

In addition, global demand for consumer electronic gadgets continues to boost the tech industry in the wake of a booming stay-at-home economy and a buying spree in the United States and Europe at the end of the year, TIER said.

In November, the composite index for the local manufacturing sector rose 2.31 points from a month earlier to 12.91, the highest in more than three years, though the index flashed a yellow-blue light for a fourth consecutive month, indicating sluggish growth, TIER said.

The growth helped the index hit the upper end of the yellow-blue light category which ranges from 10.5-13, and come closer to the green light category from 13-16, which indicates stable growth, TIER added.

TIER uses a five-color coded 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.

The think tank said the improvement in the local business climate for manufacturers in November also came after a strong performance by the local equity market and progress in vaccine development to combat COVID-19.

Of the five factors that make up the manufacturing composite index, the sub-indexes for four moved higher in November, with demand, purchases of raw materials, the general business climate and pricing up 1.20, 0.48, 0.47 and 0.25 points, respectively, from a month earlier, TIER said.

However, the sub-index for operating costs moved down by 0.09 points from a month earlier in November, TIER added.

In November, the machinery industry received a boost from rising demand for production equipment from semiconductor, medical care and 5G device suppliers, and flashed a green light, improving from a blue light in October, TIER said.

The base metals industry flashed a yellow-blue light in November, compared with a blue light in October on the back of a hike in steel product prices, TIER added.

TIER said the electronic components industry flashed a green light for the fifth consecutive month in November as demand for advanced applications such as 5G, smartphones, high performance computing devices remained strong.

TIER added that the computer and optoelectronics industries benefited from solid demand for PCs and related gadgets on the back of remote work and online learning amid COVID-19, to flash a green light in November, improving from a yellow-blue light in October.

The think tank said the global economy is expected to bounce back in 2021 due to the roll-out of vaccines to combat COVID-19, and domestic demand in Taiwan is forecast to recover, which could lend further support to the local manufacturing sector.

Source: The Central News Agency (CNA)