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September 26, 2017

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Manufacturing, service industries grow in Feb.

TAIPEI, Taiwan -- The economic outlook index for both the manufacturing and services sectors grew for the third consecutive month according to a report released by the Taiwan Institute of Economic Research (TIER, 台經院) yesterday.

According to the TIER report, the manufacturing index was pegged at 101.31 in February, up 0.08 points from January. The service index was pegged at 98.05, up 2.28 points from the previous month.

The global economy is moving in an upward trajectory, which is expected to benefit local industries including electronics, machinery, textiles and food services, TIER President David Hong (洪德生) said.

Firms Hold Positive Outlook for the Next Six Months

The TIER survey showed that 22.5 percent of manufacturing firms were optimistic about the economy in February, down 2.5 percent from January, and 33.9 percent of firms were pessimistic, up 3.9 percent from the previous month.

The Ukraine crisis and the U.S.' Fed policy of tapering off quantitative easing has added uncertainty to the market, causing more firms to hold a pessimistic outlook, Hong said.

Nevertheless, the U.S. and Europe are experiencing strong economic recovery, offsetting the uncertainty and slow growth currently experienced in Asian countries, Hong said, adding that all in all, the global economy is on track of positive growth.

Manufacturing firms in general are more optimistic about the short-term future. Nearly 46 percent of the surveyed firms hold a positive outlook about the economy in the next six months, up 4.4 percent from the pervious month, while about 10 percent were pessimistic.

In the service industry, securities, insurance and telecommunication businesses are the most optimistic about the economy in the next six months.

Real Estate Industry Underperformed

The real estate industry, however, did not fare as well in February. The construction sector's outlook index dropped 1.78 points to 94.44 from a month ago, which marked the second consecutive monthly decline.

According to TIER, less people put their properties on sale in February, real estate transactions also dropped, and the room for price bargain grew. These are signs that the real estate market is not moving as strong as it used to.

As the U.S. Fed tapered off quantitative easing (QE), changes occurred in Taiwan's capital market. The proportion of capital invested in the real estate market has declined from 32.4 percent to 21.9 percent, according to TIER researcher Liu Pei-chen (劉佩真)

With the recent rancor caused by the cross-strait service trade agreement and nationwide election campaigns expected to begin in the second half of the year, TIER holds a conservative view regarding the real estate sector's performance at the end of this month, which is traditionally regarded as the sector's boom season.

The TIER also commented on the cross-strait service trade agreement yesterday, stating that the pact is crucial to Taiwan's participation in regional economic integration in the future. According to TIER analysts, if the agreement is not approved by the Legislature, it might affect Taiwan's credibility and consequently hurt Taiwan's chance of inking trade agreements with other nations.

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