The nation’s manufacturers and service providers expect business to improve in the second half of this year after reporting lackluster sales and profits in the first half due to the COVID-19 pandemic and global inflation, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
The Taipei-based institute said that 57.1 percent of manufacturers expect business to improve, while the rate was 58.7 percent for non-manufacturing companies.
The results of the twice-yearly survey came after the official manufacturing purchasing managers’ index disappointed by shedding 13.9 points for the past six months to 46.7, slipping into contraction territory, it said.
Photo: CNA
The profitability measure fell to 38.8 percent, meaning a majority of companies saw their profits decline, a phenomenon that first appeared late last year and became more evident this year, CIER president Chang Chuang-chang (張傳章) said.
Soaring raw material and energy prices hurt demand and squeezed earnings, he added.
Meanwhile, supply chain bottlenecks deteriorated after China locked down key commercial and industrial cities in April and May to fight COVID-19 outbreaks, CIER said.
Almost all manufacturers — or 96.7 percent — said they were affected by global inflation, which rose rapidly after Russia invaded Ukraine in February, disrupting global oil and wheat supplies, it said.
Forty-seven percent expect inflation to remain a problem next year, it added.
Nearly 70 percent expect inflation to reach 2 percent this year, while more than 30 percent expect the rate to surpass 3 percent, the survey found.
According to the poll, 86.8 percent of respondents said they did not operate at maximum capacity due to falling orders and component shortages.
Among the respondents, 52.4 percent reported inventory increases, up 5.7 percentage points from six months earlier, and 18 percent said the issue of overbooking was serious.
Another 20.5 percent reported severe order delays and cancelations.
Double booking and order cancelations were most serious for suppliers of optical devices, especially flat panels, CIER said.
Virus outbreaks, rising global inflation and container shortages sit atop the list of concerns among manufacturers, it said.
Non-manufacturing firms voiced greater concern over soaring energy and raw material prices, labor shortages and China’s COVID-19 restrictions, CIER said.
Service providers generally posted poor financial results in the first half, but expect to come out of the woods soon, it said.
Companies that rely on domestic demand saw their second-quarter revenues shrink 9.64 percent on average, CIER said, adding that the rate of decline is expected to ease to 4.15 percent this quarter.
Taiwan Academy of Banking and Finance (台灣金融研訓院) chairman Wu Chung-shu (吳中書) said that robust private investments and recovering consumer spending would help the economy remain resilient, despite growing downside risks abroad.
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