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September 20, 2017

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Think tank upgrades manufacturing sector forecast

TAIPEI -- The Taiwan Institute of Economic Research (TIER, 台經院), one of Taiwan's leading think tanks, said Wednesday that it has upgraded a forecast of the local manufacturing sector for 2016, at a time when the country's exports and industrial production have shown signs of improving.

The TIER said that it has revised upward the composite index of the local manufacturing sector for 2016, adding that the index is expected to flash a yellow green light, compared with a blue light that the think tank predicted in July.

The TIER uses a five-color system to describe economic activity, with red indicating overheating, yellow-red showing fast growth, green representing stable growth, yellow-blue signaling sluggish growth and blue indicating contraction.

The think tank said that due to a recovery of the global economy, Taiwan's outbound sales for October rose by a better-than-expected expected 9.4 percent from a year earlier, and it is possible that exports will continue to grow for the rest of this year, benefiting from a year-end buying spree.

In addition, the October production index for the manufacturing sector, which accounts for more than 90 percent of Taiwan's total industrial production, rose 5.67 percent from a year earlier, the sixth consecutive month in which the index has risen year-on-year. The rising exports have encouraged local manufacturers to invest more in raw material purchases, which indicates a better operational environment, the think tank said.

Local Economy Has Bottomed Out

The TIER said that the export and industrial production data shows that the local economy has bottomed out, riding a wave of rising global demand.

In October alone, the composite index of the local manufacturing sector, compiled by the TIER, rose 0.81 points from a month earlier to 10.45.

The think tank said that efforts by international brands such as Apple Inc. to launch their latest flagship devices will continue to boost the local electronics sector for the rest of this year, but saturation of the global handheld market will compromise the growth of the segment. TIER said that the electronics sector is expected to flash a yellow-blue light.

As for the chemical/rubber sector, the TIER said, while crude oil prices for the second half of this year could grow from a year earlier, a positive sign for the sector, a fall in rubber and chemical prices in the first half of the year is expected to drag down the growth of the sector for the whole year. The think tank said that the segment could also flash a blue light in 2016.

Textile Sector Expected to Flash a Blue Light

The TIER said that the local textile sector, including ready-to-wear garment makers, is expected to flash a blue light for 2016, since demand from China remains weak and competition from countries in South Asia and South East Asia escalates.

According to the think tank, the metal/machinery segment could flash a blue light for the whole of 2016, since a supply glut in the global steel market will continue to depress the metal industry.

Earlier this month, the TIER forecast that Taiwan's gross domestic product for 2017 will grow 1.65 percent from a year earlier, compared with an estimate of a 1.17 percent increase for 2016, indicating that the local manufacturing sector will continue to improve next year.

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