Manufacturers turn cautious, but service sector upbeat in January

Taipei--Business sentiment in Taiwan's manufacturing sector turned cautious in January as many industries faced their annual slow seasons, according to the results of a survey released by the Taiwan Institute of Economic Research (TIER) Friday.

Taiwan's service sector remained upbeat in January, however, as the retail and food/beverage segments benefited from strong consumer spending ahead of the Year of the Rooster in late January, TIER said.

TIER, one of Taiwan's leading think tanks, said the manufacturing composite index for January -- which is based on the survey -- fell 1.39 points from a month earlier to 100.04, ending three consecutive months of gains.

Beyond the slow season effects, the manufacturing sector was also affected by the reduced number of working days in the month because of the Lunar New Year holiday, which started on Jan. 28 and ended on Feb. 1, TIER said,

A day earlier, a report released by the Ministry of Economic Affairs (MOEA) said the industrial production index for January rose 2.77 percent from a year earlier after a 6.25 percent year-on-year increase seen in December.

According to the MOEA, Taiwan's industrial production for January posted a year-on-year increase for the sixth consecutive month.

Also affecting sentiment in the manufacturing sector was Taiwan's slower economic growth in January than in December, which also dampened the mood to some extent.

Still, the manufacturing sector remained upbeat about market conditions over the next six months because the local economy has been on the road to recovery, TIER said.

The January survey found that 36.2 percent of respondents in the manufacturing sector thought Taiwan's economic fundamentals would improve over the next six months, up 13 percentage points from a month earlier, while 14.6 percent said the fundamentals would be worse over that time, down 4.8 percentage points from a month earlier.

Bucking the downturn in the manufacturing sector as a whole, the construction sub-index rose 1.3 points from a month earlier to 87.64 in January, marking its second consecutive month of growth, TIER said.

The think tank said the improving sentiment in the construction field reflected an increase in the number of property transactions during the month as home sellers were more willing to cut their asking prices to reach deals quickly.

In January, the number of transactions of homes, shops and offices in Taiwan's six major cities was up 37.5 percent from a year earlier.

Meanwhile, the composite index for the local service sector for January rose 2.17 points from a month earlier to 91.44, the second consecutive month in which it rose, the survey found.

Gordon Sun (???), director of TIER's Economic Forecasting Center, said peak season effects seen during the Lunar New Year holiday boosted the sales of many retailers and restaurant operators.

More importantly, Sun said, sentiment in Taiwan's service sector was also lifted by gains posted on Taiwan's stock market. The booming stock market increased consumers' willingness to spend money in the retail sector, he said.

In January, the weighted index of the Taiwan Stock Exchange rose 2.10 percent on the back of ample liquidity.

Source: Focus Taiwan News Channel