DIVERGING TRENDS:
Tech exporters stayed buoyant on robust AI demand, while textiles and transport weakened amid softer end-user demand and lower output
Taiwan’s manufacturing sector flashed a “green” light, indicating stable growth, in August, retreating from “yellow-red” in July, as old-economy industries faced weaker end-user demand, the Taiwan Institute of Economic Research (TIER, 台經院) said on Friday. The August TIER composite index, which gauges the manufacturing sector’s overall health, fell 1.36 points from July’s revised 17.32 to 15.96, within the green-light range of 13-16, after a yellow-red light in July. TIER uses a five-color system to assess activity: “red” for booming or overheating, “yellow-red” for fast growth, “green” for stable growth, “yellow-blue” for sluggish growth and “blue” for contraction.
Employees work on a machinery production line at a plant in New Taipei City’s Banciao District on March 25 last year.
Photo: CNA
TIER, one of Taiwan’s leading think tanks, said the local tech sector continued to benefit from the global AI boom and preparations by international brands ahead of new product launches, which pushed up the country’s exports. However, TIER said old-economy industries largely became cautious due to weaker demand and clients’ reluctance to build up inventories.
Of the five factors in the August index, only the cost subindex rose by 0.03 from a month earlier. In contrast, the subindices for the general business climate, purchases of raw materials, demand and pricing fell by 0.74, 0.28, 0.19 and 0.18 points, respectively, from July. Despite the TAIEX, the Taiwan Stock Exchange’s benchmark index, rebounding in August, more manufacturers became cautious about their operational outlook, TIER added. TIER said industries flashing a blue light accounted for 1.76 percent of manufacturing output value in August, up from 0.28 percent in July, while those flashing a yellow-blue light accounted for 20.06 percent, up from 10.10 percent. By industry, TIER said the textile industry flashed a green light in August, retreating from a yellow-red light in July as end-user demand stayed weak, sending production lower, while the transportation industry continued to flash a yellow-blue light due to falling car sales and production adjustments. The computer and optoelectronics index flashed another red light in August as AI demand stayed robust, with clients keen to build up inventories, boosting the industry’s exports and production, TIER said. Although business opportunities created by AI are expected to drive Taiwan’s economic growth, TIER also identified several uncertainties in the global economy. These include military conflict in the Middle East, higher crude oil prices, which are raising production costs for businesses, and inflationary pressure that could prompt major central banks to raise rates, TIER said.