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2016.4.25
Global recovery is tied with the potential upturn of crude oil price in the 2nd half of 2016
TIER expects a cyclical recovery in Q3 but adjusts the annual growth forecast downward due to a disappointing Q1

The Taiwanese Economy in March 2016

The International Monetary Fund (IMF) has revised its global growth forecast four consecutive times within the recent one year. The fact indicates that the global demand is still weak. However, many believed that the global recovery could be closely correlated with the crude oil price in a sense. From that regards, forecasting agencies in the world are keeping their fingers crossed for the second half of this year expecting a tepid hike in oil prices. The Taiwan Institute of Economic Research (TIER) expects a cyclical in the third quarter; however, the institute adjusts its annual growth forecast down from 1.57% to 1.27% due to the fact that exports in the first quarter were worse than expected.
Taiwan's exports in March 2016 decreased by 11.40% compared with the same month last year. The decline in exports would be a 14-month consecutive y-o-y drop. Taiwan's exports to China, ASEAN 6, the US, European Union, and Japan all dropped by significant percentage points in March. Regarding imports, Taiwan's imports in March also dropped by 16.95% compared with March in 2015. From January to March this year, Taiwan's exports and imports gave a trade surplus of US$ 12.16 billion or a decrease by 3.34% on a y-o-y basis.
Taiwan's consumer price index (CPI) went up by 2.0% in March 2016 compared with the same month of previous year. The current inflation rate has remained relatively high. Although global crude oil price plunge would drag down the price level, hiking vegetable and fruit prices due to recent climate change and heavy precipitations offset the effect of dropping oil prices and push up the price level. The core inflation rate however stood at only 0.79% in March. In addition, the wholesale price index (WPI) tumbled by 4.94% in March on the year-on-year basis.
The unemployment rate in February stood at 3.89% representing a 0.06 percentage points decrease compared with the previous month. The current unemployment rate is still considered at a relatively high level. Because unemployment rate is a lag indicator, which in a way has reflected that economic slowdown since Q2 last year.
As for exchange rate, the NTD went somewhat stronger due to the relatively weaker USD. The NTD versus USD stood at 32.28 vs. 1 in late March 2016 indicating 3.75% appreciation. As the US Federal Reserve finally hiked its federate funds rate on December 16, the greenback has gone even stronger earlier this year. However, the Fed decided to postpone a rate hike in its March FOMC meeting. The dovish decision has turned everything around. Regarding the interest rate, it remained low and steady in March due to the continued loose monetary operations by the CBC.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 54.5% or increased by 37.2% compared with respondents who perceiving better business in the previous month. The portion of those perceived business were getting worse in the target month was 9.8% or decreased by 36.3 percentage points than 46.1% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 35.6% or decreased by 1.0 percentage points compared with 36.6% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was rather optimistic.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 33.3% in the target month or decreased by 8.9 percentage points than 42.2% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 13.1% or increased by 5.1 percentage points compared with 8.0% feeling rather pessimistic about the future in the previous month. The portion of manufacturing firms who perceived business remained constant in the next six months stood at 53.5% or increased by 3.7 percentage points compared with 49.8% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was more netural.
The manufacturing Composite Indicator for March, 2016 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 92.42 points in February 2016 moved up slightly to 96.49 points. Figure 1 shows an increase of 4.07 points, the second consecutive mount.
The TIER Service Sector Composite Indicator for March 2016 adjusted for seasonal factors on moving average saw an upward correction and from a revision of 85.90 points in February 2016 went up to 88.51 points. Figure 1 shows an increase of 2.61 points, the fourth month consecutive increase.
In addition, the TIER Construction Sector Composite Indicator for March 2016 adjusted for seasonal factors on moving average, also saw an upward correction, and from a revision of 77.90 points in February 2016 went up to 78.22 points. Figure 1 shows an increase of 0.32 points, the second consecutive mount.

Figure 1, TIER Business Composite Index

Forecast on Individual Industries

Following are manufacturers' sentiments that are industry-specific in the monthly TIER surveys:

● Manufacturers' sentiments that have been in decline in the March survey and are expected to deteriorate over the next six months include:
Construction, Basic civil structure construction.
   
● Manufacturers' sentiments that have been in decline in the March survey, but are expected to improve over the next six months include:
Precision Instruments Manufacturing, Restaurants and hotels.
   
● Manufacturers' sentiments that have been in decline in the March survey and are expected to remain sluggish over the next six months include:
Food, Cutlery and tools Manufacturing, Communications Equipment and Apparatus Manufacturing, Wholesale.
   
● Manufacturers surveyed who felt the March outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Porcelain and Ceramic Products Manufacturing, Cement and Cement Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing.
   
● Manufacturers surveyed who felt the March outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
None.
   
● Manufacturers surveyed who felt the March outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Slaughtering, Frozen Food Manufacturing, Edible Oil Manufacturing, Flour Milling and Grain Husking , Soft Drink Manufacturing , Prepared Animal Feeds Manufacturing, Textiles Mills, Yarn Spinning Mills, Fabric Mills , Apparel, Clothing Accessories and Other Textile Product Manufacturing , Leather, Fur and Allied Product Manufacturing, Paper Manufacturing, Man-made Fibers Manufacturing, Non-metallic Mineral Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Electrical Machinery, Supplies Manufacturing and Repairing, Electronic Parts and Components Manufacturing, Retail sales, Telecommunication services, Transportation and storage.
   
● Manufacturers' sentiments that have improved in the March survey and is expected to deteriorate over the next six months include:
Chemical Products Manufacturing, Electrical Appliances and Housewares Manufacturing.
   
● Manufacturers' sentiments that have improved in the March survey and is expected to remain upbeat over the next six months include:
Petrochemicals Manufacturing, Glass and Glass Products Manufacturing, Education and Entertainment Articles Manufacturing.
   
● Manufacturers' sentiments that have improved in the March survey and the trend is expected to continue for the next six months include:  
Wood and Bamboo Products Manufacturing, Printing, Industrial Chemicals, Plastics and rubber raw materials, Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing, Plastic Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal dies, Screw, Nut Manufacturing, Metal Structure and Architectural Components Manufacturing, Industrial Machinery, Electrical Machinery, Electric Wires and Cables Manufacturing, Electronic Machinery, Audio and Video Electronic Products Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Motor Parts Manufacturing, Motorcycles Manufacturing, Motorcycles Parts Manufacturing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Real estate investment, Banks, Securities, Insurance.

TIER Forecast (issued on 25th April, 2016.)
(NT$100 million, Chained (2011) Dollars)

 

 

 
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