Taiwan’s export-oriented manufacturing sector fell into contraction in November for the first time since July 2020 due to weak global demand and ongoing inventory adjustments, the Taiwan Institute of Economic Research (TIER) said Friday.
The composite index for the local manufacturing sector, which gauges the sector’s fundamentals, fell by 1.18 points to 9.7 points in November, down from 10.88 points a month earlier, according to the TIER, one of Taiwan’s leading economic think tanks.
That sent the index into the “blue” light category on the TIER’s five-tier scale, under which “red” indicates overheating, “yellow-red” fast growth, “green” stable growth, “yellow-blue” sluggish growth, and “blue” contraction.
The index last fell below 10.5, the threshold for flashing a “blue” light, in July 2020 when it hit 9.97.
The TIER said global end-user demand remained weak due to inflation and interest rate hikes, leading to negative growth in export orders and forcing manufacturers to cut output as customers draw down bloated inventories.
Sluggish demand for consumer electronics products battered the electronic parts and components manufacturing sector, and hurt Taiwan’s overall exports and the composite indicator index, the TIER said.
In November, a blue light also flashed for the electronic parts and components index, changing from yellow-blue the previous month.
Looking ahead, TIER expected the overall contraction in the manufacturing sector to last for several more months because of the massive outbreak of COVID-19 in China since Beijing eased epidemic control measures in early December.
Because the outbreak will increase the risk of interruptions to supply chains and exacerbate downward pressure on China’s economy, old economy manufacturers in particular will face challenges in maintaining export sales, the think tank predicted.
While Taiwan’s tech sector continues to have a competitive edge thanks to the production of chips for emerging technology applications, sectors that rely on manufacturing bases in China should beware of changing conditions in China and a mounting battle over technology between the United States and China, the TIER cautioned.
Source: Focus Taiwan News Channel