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2016.10.25
Global economic conditions turn stable paving the way for recovery
TIER composite indicators offer mixed signals for the near future

The Taiwanese Economy in September 2016

Despite of a slowing second quarter, the US economy is getting back on track and showing signs of steady. The fear of deflation that has been haunting the European economy has seemed subsided recently. In addition, China and Southeast Asia have both shown certain degree of recuperation. Therefore, the global conditions have started to turn stable paving the way for recovery. However, the composite indicators issued by the Taiwan Institute of Economic Research offer mixed signals for the near future with a declining manufacturing indicator, a mounting services indicator, and a turning construction indicator.
Taiwan's exports in September 2016 decreased by 1.82% compared with the same month last year, the first drop after two months of consecutive increase. Regarding imports, Taiwan's imports in September increased by 0.73% compared with imports in September 2015. From January 1 to September 30 this year, Taiwan's exports and imports gave a trade surplus of US$ 35.96 billion or a decrease by 0.38% on a y-o-y basis.
Taiwan's consumer price index (CPI) went up by 0.33% in September 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 0.95% in September, 2016. In addition, the wholesale price index (WPI) tumbled by 2.23% in September on the year-on-year basis. From a cumulative perspective, the CPI went up by 1.27% and WPI went down by 3.92% from January 1 till September 30 this year on the year-on-year basis.
The unemployment rate in September stood at 3.99% representing a 0.09 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. The salary on average from January till the end of August stood at NT$ 48,486 or 1.20% 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 31.37 vs. 1 in late September 2016 indicating a mild appreciation. As the US Federal Reserve decided to postpone its scheduled rate hike turning its tone to more hawkish, the greenback has gone stronger 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 September 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 21.0% or decreased by 5.5% 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 30.5% or increased by 12.3 percentage points than 18.2% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 48.50% or decreased by 6.8 percentage points compared with 55.3% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was somewhat pessimistic.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 20.2% in the target month or increased by 7.1 percentage points than 13.1% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 19.7% or decreased by 0.8 percentage points compared with 20.5% 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 60.1% or decreased by 6.3 percentage points compared with 66.4% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was somewhat optimistic.
The manufacturing Composite Indicator for September, 2016 adjusted for seasonal factors on moving average, saw a mild downward correction, and from a revision of as 97.53 points in August 2016 moved down to 97.49 points. Figure 1 shows a decrease of 0.04 points, the second-month decline.
The TIER Service Sector Composite Indicator for September 2016 adjusted for seasonal factors on moving average however saw an upward correction and from a revision of 84.37 points in August 2016 went up to 86.77 points. Figure 1 shows an increase of 2.40 points, the second-month rise.
In addition, the TIER Construction Sector Composite Indicator for September 2016 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of 86.46 points in August 2016 went up to 87.78 points. Figure 1 shows an increase of 1.32 points, the first increase after a one-month decline.

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

 

 
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