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2018.2.26
Leading indicators signal promising US economy in 2018
TIER business composite indicators mount up simultaneously

The Taiwanese Economy in January 2018

The leading indicator recently issued by the US conference Board went up significantly. In addition, the manufacturing and non-manufacturing PMIs issued by the Institute for Supply Management both stood way beyond the point of 50. The implications would have two folds: the US recovery continues, and the US economic expansion lasts. It is obvious that the US will shoulder the world economy at least in the short run. As the market demand driven by the US is strong, all three composite indicators issued by the Taiwan Institute of Economic Research (TIER) mount up at the same time.
Taiwan's exports in January 2018 increased significantly by only 15.33% compared with the same month of 2017 that would also be the 16th month of positive growth in exports. Regarding imports, Taiwan's imports in January 2018 increased by 23.30% compared with imports in January 2017. Taiwan's exports and imports in January 2018 gave a trade surplus of US$ 2.42 billion or a decrease by 30.80% on a year-on-year basis.
Taiwan's consumer price index (CPI) went up by only 0.88% in January 2018 compared with the same month of previous year. The core inflation rate stood at 0.82% in January 2018. In addition, the wholesale price index (WPI) moved down by 0.74% in January 2018 on the year-on-year basis. In a nutshell, the current inflation is relatively mild.
As for exchange rate, the NTD went stronger due to the relatively weaker USD, despite the Fed has decided to conduct tightening measures by schedule. Nonetheless, the NTD/USD stood at 29.15 in late January 2018 indicating a 2.34% appreciation. Regarding the interest rate, it remained low and steady in January 2018 due to the continued loose monetary operations by the CBC with respect to the most recent CPI reading and relatively strong NTD; the lowest and highest over-night call rate in January 2018 stood at 0.175% and 0.186% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 28.9% or increased by 2.4 percentage points 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 16.3% or decreased by 13.8 percentage points than 30.1% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 54.8% or increased by 11.5 percentage points compared with 43.3% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was rather neutral.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 34.4% in the target month or increased by 9.6 percentage points than 24.8% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 11.8% or decreased by 6.9 percentage points compared with 18.7% 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 53.8% or decreased by 2.7 percentage points compared with 56.5% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also somewhat more optimistic.
The manufacturing composite indicator for January, 2018 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 98.81 points in December 2017 moved up to 100 points in January 2018. Figure 1 shows an increase of 1.19 points.
The TIER service sector composite indicator for January 2018 adjusted for seasonal factors on moving average, saw an upward correlation, and from a revision of as 91.67 points in December 2017 moved up to 93.05 points in January 2018 that would also be the second consecutive increase. Figure 1 shows an increase of 1.38 points.
In addition, the TIER Construction Sector Composite Indicator for January 2018 adjusted for seasonal factors on moving average also saw an upward correction, and from a revision of 104 points in December 2017 went up to 104.39 points in January 2018. Figure 1 shows an increase of 1.39 points, the third month of consecutive increase.

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:
Plastic Products Manufacturing, Restaurants and hotels.
 
● Manufacturers' sentiments that have been in decline in the January survey, but are expected to improve over the next six months include:
Printing, Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing.
 
● Manufacturers' sentiments that have been in decline in the January survey and are expected to remain sluggish over the next six months include:
Porcelain and Ceramic Products Manufacturing, Audio and Video Electronic Products Manufacturing, Basic civil structure construction, Telecommunication services.
 
● 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:
Data Storage Media Units Manufacturing and Reproducing.
 
● 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:
Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Electronic Parts and Components Manufacturing, Precision Instruments Manufacturing.
 
● 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, Food, Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain Husking , Soft Drink Manufacturing , Textiles Mills, Yarn Spinning Mills, Fabric Mills , Apparel, Clothing Accessories and Other Textile Product Manufacturing , Leather, Fur and Allied Product Manufacturing, Wood and Bamboo Products Manufacturing, Man-made Fibers Manufacturing, Chemical Products Manufacturing, Petroleum and Coal Products Manufacturing, Glass and Glass Products Manufacturing, Fabricated Metal Products Manufacturing, Metal dies, Metal Structure and Architectural Components Manufacturing, Electric Wires and Cables Manufacturing, Motor Parts Manufacturing, Bicycles Parts Manufacturing, Real estate investment, Retail sales, Wholesale, Transportation and storage.
 
● Manufacturers' sentiments that have improved in the January survey and is expected to deteriorate over the next six months include:
Prepared Animal Feeds Manufacturing.
 
● Manufacturers' sentiments that have improved in the January survey and is expected to remain upbeat over the next six months include:
Paper Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and tools Manufacturing, Industrial Machinery, Electrical Appliances and Housewares Manufacturing, Education and Entertainment Articles Manufacturing, Construction, Banks.
 
● Manufacturers' sentiments that have improved in the January survey and the trend is expected to continue for the next six months include:
Frozen Food Manufacturing, Industrial Chemicals, Petrochemicals Manufacturing, Plastics and rubber raw materials, Rubber Products Manufacturing, Iron and Steel Basic Industries, Screw, Nut Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Motorcycles Manufacturing, Motorcycles Parts Manufacturing, Bicycles Manufacturing, Securities, Insurance.

 

 

 
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