| Chinese | Home |  
Home / Monthly


2016.8.25
Propulsion of global economic recuperation remains weak
TIER manufacturing composite indicator signifies cyclical recovery

The Taiwanese Economy in July 2016

The GDP growth of the US in Q2 on y-o-y basis was only 1.2% or 1.4 percentage points less than the markets had expected due to declining private investment. The Euro Area (EA19) and European Union (EU28) grew by 1.6% and 1.8% in Q2 respectively compared with the same quarter of last year. As for Japan, its y-o-y GDP growth rate stood at 0.6% because of weakening external and internal demands. Overall, advanced economies have not performed well so far. On the other hand, emerging economies such as China and ASEAN countries have outperformed the markets' expectation. However, the overall propulsion of global economic recuperation is still weak. Both Global Insight and EIU revised their forecasts for global growth downward. Nevertheless, the business composite indicators issued by the Taiwan Institute of Economic Research (TIER) signify signs of cyclical recovery.
Taiwan's exports in July 2016 increased by 1.20% compared with the same month last year, the first increase in exports after a historical 17 months of consecutive drop. Regarding imports, Taiwan's imports in July dropped by 0.16% compared with imports in July 2015. From January 1 to July 31 this year, Taiwan's exports and imports gave a trade surplus of US$ 27.63 billion or an increase by 0.14% on a y-o-y basis.
Taiwan's consumer price index (CPI) went up by 1.23% in July 2016 compared with the same month of previous year. The current inflation rate has remained somewhat higher compared with most advanced economies. 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 still push up the price level. The core inflation rate however stood at only 0.79% in July. In addition, the wholesale price index (WPI) tumbled by 2.41% in July on the year-on-year basis.
The unemployment rate in July stood at 4.02% representing a 0.10 percentage points increase 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. The salary on average in June stood at NT$ 44,998 or 0.94% more compared with the averaged salary in the same month last year.
As for exchange rate, the NTD went somewhat stronger due to the relatively weaker USD. The NTD versus USD stood at 31.92 vs. 1 in late July 2016 indicating a very mild appreciation. As the US Federal Reserve decided to postpone its scheduled rate hike turning its tone to more dovish, the greenback has gone weaker recently. Fed's decision in the near future meetings may add further uncertainties to the dithering global business outlook. Regarding the interest rate, it remained low and steady in July 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 26.6% or increased by 4.5% 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 25.7% or decreased by 0.9 percentage points than 26.6% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 47.7% or decreased by 3.7 percentage points compared with 51.4% 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 27.9% in the target month or increased by 6.3 percentage points than 21.6% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 16.6% or decreased by 3.1 percentage points compared with 19.7% 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 55.5% or decreased by 3.2 percentage points compared with 58.7% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was optimistic as well.
The manufacturing Composite Indicator for July, 2016 adjusted for seasonal factors on moving average, saw a upward correction, and from a revision of as 96.66 points in June 2016 moved up to 98.63 points. Figure 1 shows an increase of 1.97 points, the second month consecutive rise.
The TIER Service Sector Composite Indicator for July 2016 adjusted for seasonal factors on moving average however saw a downward correction and from a revision of 85.54 points in June 2016 went down to 84.37 points. Figure 1 shows a decrease of 1.17 points, the second month consecutive decline.
In addition, the TIER Construction Sector Composite Indicator for July 2016 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of 85.95 points in June 2016 went up to 90.08 points. Figure 1 shows an increase of 4.13 points, the sixth monthly 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 July survey and are expected to deteriorate over the next six months include:
Chemical Products Manufacturing, Construction.
 
● Manufacturers' sentiments that have been in decline in the July survey, but are expected to improve over the next six months include:
Data Storage Media Units Manufacturing and Reproducing.
 
● Manufacturers' sentiments that have been in decline in the July survey and are expected to remain sluggish over the next six months include:
Frozen Food Manufacturing, Textiles Mills, Yarn Spinning Mills, Fabric Mills , Man-made Fibers Manufacturing, Rubber Products Manufacturing, Cutlery and tools Manufacturing, Electric Wires and Cables Manufacturing, Electrical Appliances and Housewares Manufacturing, Audio and Video Electronic Products Manufacturing, Basic civil structure construction, Wholesale.
 
● Manufacturers surveyed who felt the July outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Plastic Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Metal Structure and Architectural Components Manufacturing, Motor Parts Manufacturing.
 
● Manufacturers surveyed who felt the July outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Glass and Glass Products Manufacturing, Electronic Parts and Components Manufacturing, Motor Vehicles Manufacturing, Precision Instruments Manufacturing.
 
● Manufacturers surveyed who felt the July outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Food, Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain Husking , Soft Drink Manufacturing , Prepared Animal Feeds Manufacturing, Apparel, Clothing Accessories and Other Textile Product Manufacturing , Leather, Fur and Allied Product Manufacturing, Wood and Bamboo Products Manufacturing, Paper Manufacturing, Printing, Industrial Chemicals, Plastics and rubber raw materials, Petroleum and Coal Products Manufacturing, Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Screw, Nut Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Motorcycles Parts Manufacturing, Bicycles Manufacturing, Telecommunication services, Transportation and storage.
 
● Manufacturers' sentiments that have improved in the July survey and is expected to deteriorate over the next six months include:
Real estate investment.
 
● Manufacturers' sentiments that have improved in the July survey and is expected to remain upbeat over the next six months include:
Machinery and Equipment Manufacturing and Repairing, Industrial Machinery, Education and Entertainment Articles Manufacturing, Restaurants and hotels.
 
● Manufacturers' sentiments that have improved in the July survey and the trend is expected to continue for the next six months include:
Petrochemicals Manufacturing, Metal dies, Transport Equipment Manufacturing and Repairing, Motorcycles Manufacturing, Bicycles Parts Manufacturing, Retail sales, Banks, Securities, Insurance.

 

 

 
topˆ