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2017.2.24
The world economy is on the right track for now
TIER business composite indicators sending mixed signals

The Taiwanese Economy in January 2017

The world economy is on the right track: a) the US manufacturing is recovering, b) the job market in European is improving, and c) the Chinese export is growing again. However, the most recent business composite indicators issued by the Taiwan Institute of Economic Research (TIER) are sending mixed signals due to less working days during the lunar new year break.
Taiwan's exports in January 2017 increased by 6.99% compared with the same month of 2016. Regarding imports, Taiwan's imports in January 2017 increased by 8.40% compared with imports in January 2016. For the entire month of January 2017, Taiwan's exports and imports gave a trade surplus of US$ 3.49 billion or a decrease by 0.57% on a y-o-y basis.
Taiwan's consumer price index (CPI) went up by 2.25% in January 2017 compared with the same month of previous year. The current inflation rate has heated up compared with previous months. The core inflation rate stood at a relatively more tepid ratio as 1.65% in January, 2017. In addition, the wholesale price index (WPI) increased by 2.72% in January 2017 on the year-on-year basis, also the largest increase for the past 60 months.
As for exchange rate, the NTD went somewhat stronger due to the relatively weaker USD in January 2017, as the US president Donald Trump recently complained about the strong USD causing the US economy going slow. The USD/NTD stood at 31.360 in late January 2017 indicating a 2.85% appreciation. Regarding the interest rate, it remained low and steady in January 2017 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 19.2% or decreased by 7.9% 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 28.7% or increased by 10.5 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 52.2% or decreased by 2.5 percentage points compared with 54.7% 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 36.2% in the target month or increased by 13.0 percentage points than 23.2% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 14.6% or decreased by 4.8 percentage points compared with 19.4% 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 49.1% or decreased by 8.4 percentage points compared with 57.5% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was rather optimistic.
The manufacturing composite indicator for January, 2017 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 101.43 points in December 2016 moved down to 100.04 points. Figure 1 shows a decrease of 1.39 points, the first drop after 3-month of consecutive increase.
The TIER service sector composite indicator for January 2017 adjusted for seasonal factors on moving average saw an upward correction and from a revision of 89.27 points in December 2016 went up to 91.44 points. Figure 1 shows an increase of 2.17 points, the second month of consecutive increase.
In addition, the TIER Construction Sector Composite Indicator for January 2017 adjusted for seasonal factors on moving average saw an upward correction as well, and from a revision of 86.34 points in December 2016 went up to 87.64 points. Figure 1 shows an increase of 1.30 points, the second month of consecutive increase, too.

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

 

 

 
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