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2016.9.26
Slowing global trade provides limited propulsion to recovery
TIER composite indicators signal tepid growth for the rest of the year

The Taiwanese Economy in August 2016

Although the US has been on a by and large recovery track, its most recent GDP growth and job market did not meet the market expectation. The European economy seems to be recovering as well but on an extremely slow pace. Japan has been working hard on picking up domestic demand; however, headwinds continue to squeeze its fragile external demand. China is at the phase of so far so good; nevertheless, an uncertainty for the near future remains. As the EIU revises down its forecast for world trade growth in 2016 from 2.5% to only 1.8%, slowing global trade will certainly limit the propulsion to economic recuperation. As for the economy of Taiwan, TIER composite indicators signal tepid growth for the rest of the year.
Taiwan's exports in August 2016 increased by 1.01% compared with the same month last year, the second increase in exports after a historical 17 months of consecutive drop. Regarding imports, Taiwan's imports in August dropped by 0.78% compared with imports in August 2015. From January 1 to August 31 this year, Taiwan's exports and imports gave a trade surplus of US$ 31.58 billion or an increase by 1.34% on a y-o-y basis.
Taiwan's consumer price index (CPI) went down by 0.57% in August 2016 compared with the same month of previous year. The current inflation rate has turned somewhat lower compared with previous months. The core inflation rate h stood at only 0.77% in August, 2016. In addition, the wholesale price index (WPI) tumbled by 4.10% in August on the year-on-year basis. From a cumulative perspective, the CPI went up by 1.38% and WPI went down by 3.93% from January 1 till August 30 this year on the year-on-year basis.
The unemployment rate in August stood at 4.082% representing a 0.06 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 from January till the end of July stood at NT$ 49,200 or 1.53% less compared with the averaged salary in the same period last year.
As for exchange rate, the NTD went somewhat stronger due to the relatively weaker USD. The NTD versus USD stood at 31.28 vs. 1 in late August 2016 indicating a 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 August 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 26.3% or increased by 0.65% 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 18.4% or decreased by 6.6 percentage points than 25.0% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 55.27% or increased by 5.9 percentage points compared with 49.3% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was somewhat optimistic.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 13.5% in the target month or decreased by 12.8 percentage points than 26.3% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 18.4% or decreased by 1.8 percentage points compared with 20.2% 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 68.1% or increased by 14.6 percentage points compared with 53.57% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was constant.
The manufacturing Composite Indicator for August, 2016 adjusted for seasonal factors on moving average, saw a mild downward correction, and from a revision of as 98.20 points in July 2016 moved down to 97.72 points. Figure 1 shows a decrease of 0.48 points, the first decline after two-month consecutive rise.
The TIER Service Sector Composite Indicator for August 2016 adjusted for seasonal factors on moving average however saw an upward correction and from a revision of 84.07 points in July 2016 went up to 84.47 points. Figure 1 shows an increase of 0.40 points, the first rise after two-month consecutive decline.
In addition, the TIER Construction Sector Composite Indicator for August 2016 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of 89.46 points in July 2016 went down to 87.71 points. Figure 1 shows a decrease of 1.75 points, the first decline after 5-month 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 August survey and are expected to deteriorate over the next six months include:
Man-made Fibers Manufacturing, Construction, Real estate investment.
 
● Manufacturers' sentiments that have been in decline in the August survey, but are expected to improve over the next six months include:
None.
 
● Manufacturers' sentiments that have been in decline in the August survey and are expected to remain sluggish over the next six months include:
Textiles Mills, Fabric Mills , Machinery and Equipment Manufacturing and Repairing, Cutlery and tools Manufacturing, Industrial Machinery, Audio and Video Electronic Products Manufacturing, Insurance.
 
● Manufacturers surveyed who felt the August 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.
 
● Manufacturers surveyed who felt the August outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Motor Parts Manufacturing, Precision Instruments Manufacturing.
 
● Manufacturers surveyed who felt the August outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Food, Slaughtering, Frozen Food Manufacturing, Prepared Animal Feeds Manufacturing, Yarn Spinning Mills, Apparel, Clothing Accessories and Other Textile Product Manufacturing , Leather, Fur and Allied Product Manufacturing, Wood and Bamboo Products Manufacturing, Paper Manufacturing, Industrial Chemicals, Petrochemicals Manufacturing, Plastics and rubber raw materials, Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing, Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing, Iron and Steel Basic Industries, Electrical Appliances and Housewares Manufacturing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Motorcycles Parts Manufacturing, Bicycles Manufacturing, Basic civil structure construction, Retail sales, Wholesale, Restaurants and hotels, Banks, Securities, Telecommunication services, Transportation and storage.
 
● Manufacturers' sentiments that have improved in the August survey and is expected to deteriorate over the next six months include:
Chemical Products Manufacturing, Plastic Products Manufacturing.
 
● Manufacturers' sentiments that have improved in the August survey and is expected to remain upbeat over the next six months include:
Printing, Glass and Glass Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Education and Entertainment Articles Manufacturing.
 
● Manufacturers' sentiments that have improved in the August survey and the trend is expected to continue for the next six months include:
Edible Oil Manufacturing, Flour Milling and Grain Husking , Soft Drink Manufacturing , Fabricated Metal Products Manufacturing, Metal dies, Screw, Nut Manufacturing, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electric Wires and Cables Manufacturing, Electronic Parts and Components Manufacturing, Motorcycles Manufacturing, Bicycles Parts Manufacturing.

 

 

 
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