Taiwan’s manufacturing sector remained in contraction mode in September for the third consecutive month, signaling a slowdown in the economy due mainly to weak global demand, the Chung-Hua Institution for Economic Research (CIER) said Monday, adding that domestic demand will be the main economic driver in the near future.

Taiwan’s seasonally adjusted Purchasing Managers’ Index (PMI), which measures the health of the manufacturing sector, fell by 2.3 points in September from a month earlier to 44.9, the lowest in more than two years, according to data compiled by the CIER, a leading Taiwanese think tank.

However, among the major factors in the September PMI, the sub-index for the business outlook over the next six months remained flat at 28.3 from August, according to the CIER.

With global demand waning, Taiwan’s economic expansion has slowed, CIER President Chang Chuang-chang (張傳章) said at a press conference, adding that international uncertainty in the medium and long term also spurred concerns for businesses.

CIER Vice President Yeh Chun-hsien (葉俊顯) said that the continued implementation of interest rate hikes by major global central banks to slow overall demand had certainly affected Taiwan’s export-oriented economy.

The ‘China’ factor

In addition, as China remained Taiwan’s largest export destination in 2021, all eyes are on the Chinese Communist Party’s (CCP) quinquennial congress this year which will begin on Oct. 16, Yeh noted.

After the 20th National Congress of the CCP, China’s general policies and its economic trajectory will become clearer, Yeh added.

Taiwan’s economy grew by 6.28 percent in 2021 on the back of strong exports but the economy is likely to grow at a slower pace this year amid weak global demand.

Taiwan’s GDP grew by 3.08 percent year-on-year in the second quarter of this year, according to government data.

Noting that consumption plays a fundamental role in Taiwan’s economic growth, CIER Vice President Wang Jiann-chyuan (王健全) said that the next step that should be taken is to spur domestic consumption to boost economic growth.

Non-manufacturing sectors

Meanwhile, the non-manufacturing index (NMI), which covers service sector activity, also fell in September, dropping by 1.6 points from a month earlier to 52.2, but it remained in expansion mode for the third consecutive month, according to CIER.

This might be because food and beverage operators, travel agencies, and hoteliers are upbeat about future business as Taiwan is set to reopen its borders to all inbound and outbound visitors traveling independently or in tour groups on Oct. 13 as the COVID-19 situation has stabilized, CIER researcher Chen Shin-hui (陳馨蕙) said.

For the PMI and NMI, readings above 50 indicate expansion, while those below 50 represent contraction.

Source: Focus Taiwan News Channel