Local Manufacturing Sector Flashes 5th Sluggish Growth

With the ongoing U.S.-China trade dispute, uprooted financial sector, sluggish sales for the new Apple smartphone, the manufacturing industry sees a pessimistic forecast for the next six months.

This has led to the local manufacturing sector to flash a “yellow-blue” light in October, said Taiwan Institute of Economic Research (TIER) on Thursday, making this the fifth consecutive month of sluggish growth.

TIER uses a five-color system to describe economic activity: red indicates overheating, yellow-red for growth, green for stable growth, yellow-blue for sluggish growth and blue for a contraction.

Buoyed by new mobile devices hitting the shelves, international oil prices have remained steady and added with more working days than last year, local exports and imports, production index and outbound orders have grown significantly in October.

Though, the worsening global situation has led manufacturers to become more cautious of next year's economic situation, dragging down the local manufacturing index benchmark. October's index was only 0.54 points higher than the previous month as a result, maintaining the yellow-blue light.

Not all things looked gloomy for each sector in the manufacturing industry; for the oil, coal, plastics and rubber products industries, the former saw prices rise along with strong international oil prices, while in the latter, companies seeing the worsening trade dispute had collectively gone on ahead to make their orders, buoying demand.

In terms of machinery equipment, global need for machinery is strong, however, the market has adopted a wary attitude due to the trade war, prompting just a 0.4% growth of outbound orders for machinery products.

As to how the overall manufacturing industry performed this year, TIER pointed to the continual expansion of the global economy, as well as strong prices for international oil and raw materials have resulted in good business for local and international imports and exports.

However, with the boom season for electronic parts orders wrapping up for the year, as well as dropping oil prices recently and rising base periods, there are expectations that trade growth will be stunted in the fourth quarter.

Looking forward to 2019, global forecast organizations have largely stated that next year's global economic growth will not be as strong as 2018. Coupled with the recent falling prices for oil and raw materials, global trade will falter, along with difficulties of seeing domestic exports seeing the high growth of recent years.

TIER has stated that while the manufacturing industry will benefit from new technologies like AI, IoT and high-performance computing, growth will be stunted. The think tank expects to see yellow-blue lights, indicating sluggish growth, for sectors throughout the manufacturing industry.

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Economic Daily News