The manufacturing sector showed signs of fast growth in January, as the bellwether electronics industry received a boost from global interest in artificial intelligence (AI) development, the Taiwan Institute of Economic Research (TIER, 台經院) said on Thursday.
TIER’s composite index, which gauges the fundamentals of the local manufacturing sector, rose 3.85 points from a month earlier to 16.04 in January, its highest level since August 2021, when it hit 16.48, data compiled by the economic think tank showed.
That translates into a “yellow-red” light, signifying fast growth.
Photo: CNA
The think tank uses a five-tier system to assess economic activity in the sector, with “red” indicating overheating, “yellow-red” showing fast growth, “green” representing stable growth, “yellow-blue” signaling sluggish growth and “blue” indicating contraction.
Although manufacturing activity in the US, the EU, China and Japan has continued to slump, their purchasing managers’ indices trended higher, showing that the fundamentals of the global manufacturing sector are improving, TIER said.
Export-oriented manufacturers continued to benefit from the growing popularity of AI applications worldwide, while bloated inventories in the semiconductor industry have gradually been trimmed, leading to new export orders, the institute said.
The January spike was also the result of a low base of comparison, caused by the timing of the Lunar New Year holiday, TIER said.
The subindex for raw material purchases rose 2.26 points from a month earlier, the fastest increase among the index’s five components, as manufacturers were keen to restock inventory, TIER said.
The subindices for demand and pricing moved higher by 2.07 and 0.32 points respectively, while the sub-indices for the general business climate and costs moved lower by 0.76 and 0.04 respectively, it said.
Meanwhile, TIER’s survey of businesses showed that only 1.97 of polled manufacturers remained in “contraction” mode in January, sharply down from 30.99 percent of manufacturers in a similar poll conducted in December.
Moreover, 40.07 percent of manufacturers reported “fast growth” in their businesses in January, compared with only 4.5 percent in December.
However, 10.17 percent of respondents indicated that business was overheating in January, compared with zero in December.
By sector, electronic components saw “fast growth” in January, compared with “stable growth” in December, as AI development and inventory drawdown boosted demand for high-end chips, TIER said.
The base metal industry benefited from an increase in steel product prices and its businesses reported “steady growth,” an improvement from December’s “sluggish growth.”
The auto manufacturing and parts sectors saw “stable growth,” unchanged from a month earlier, as a decline in auto parts exports to China offset the benefits of an increase in domestic auto sales.
Global uncertainties could affect Taiwan in the coming months, TIER said.
These include how the Chinese economy would evolve, when central banks in the US and Europe would start to cut interest rates, and how geopolitical tensions would play out, it said.
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