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2019.2.25
Progress in trade talk dismisses global economic uncertainty to some extent
TIER composite indicators for manufacturing and service poised for partial rebound

The Taiwanese Economy in January 2019

Despite the fact that the Japanese and European economies are slowing down, the US demand is still pulled by strongly recovering jobs market. In addition, the trade talk between the US and China is approaching a temporary truce, whereas such progress has helped dismiss the global economic uncertainty to some extent. The Taiwan Institute of Economic Research (TIER) issued its most recent composite indicators for manufacturing and service, and the readings seemed poised for partial rebound; however, it is indeed too early to cerebrate just yet.
Taiwan's exports in January 2019 decreased by 0.32% compared with the same month of 2018. Regarding imports, Taiwan's imports in January 2019 increased by 6.85% compared with imports in January 2018. Exports and imports gave a trade surplus of US$ 0.91 billion on a y-o-y basis, the lowest value for the most recent 6 years.
Taiwan's consumer price index (CPI) increased by 0.20% in January 2019 compared with the same month of previous year. The core inflation rate excluding prices of the energy and food grew by 0.53% in January 2019. In addition, the wholesale price index (WPI) moved up by 0.75% in January 2019 on the year-on-year basis.
As for exchange rate, the NTD similar to all other major currencies in the world went somewhat weaker due to the relatively stronger USD, as the Fed is not as dovish as expected by the market. The NTD/USD stood at 30.74 in late January 2019 indicating a 0.02% depreciation. Regarding the interest rate, it remained low and steady in January 2019 due to the continued loose monetary operations by the CBC with respect to the most recent CPI reading and potential global uncertainties; the lowest and highest over-night call rate in January 2019 stood at 0.175% and 0.187% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 30.4% or increased by 16.4 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 28.7% or decreased by 14.6 percentage points than 43.3% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 41.0% or decreased by 1.7 percentage points compared with 42.7% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was more optimistic than the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 28.1% in the target month or increased by 8.2 percentage points than 19.9% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 18.6% or decreased by 14.3 percentage points compared with 32.9% 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 53.4% or increased by 6.1 percentage points compared with 47.3% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also more optimistic than the previous month.
The manufacturing composite indicator for January 2019 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 86.0 points in December 2018 moved up to 89.57 points. Figure 1 shows an increase of 3.57 points, the second month of consecutive increase.
The TIER service sector composite indicator for January 2019 adjusted for seasonal factors on moving average, also saw an upward correlation, and from a revision of as 91.1 points in December 2018 moved up to 92.4 points. Figure 1 shows an increase of 1.30 points, also the second month of consecutive increase.
In addition, the TIER Construction Sector Composite Indicator for January 2019 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of 94.72 points in December 2018 went down to 93.59 points. Figure 1 shows a decrease of 1.13 points, the first dip after a one-month 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:
Yarn Spinning Mills, Porcelain and Ceramic Products Manufacturing, Cutlery and Tools Manufacturing, Audio and Video Electronic Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Motorcycles Manufacturing, Motorcycles Parts Manufacturing.
 
● Manufacturers' sentiments that have been in decline in the January survey, but are expected to improve over the next six months include:
Cement and Cement Products Manufacturing, Basic Civil Structure Construction.
 
● Manufacturers' sentiments that have been in decline in the January survey and are expected to remain sluggish over the next six months include:
Man-made Fibers Manufacturing, Non-metallic Mineral Products Manufacturing, Metal Structure and Architectural Components Manufacturing, Electric Wires and Cables Manufacturing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Electronic Parts and Components Manufacturing, 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:
Industrial Chemicals, Petrochemicals Manufacturing, Petroleum and Coal Products Manufacturing, Glass and Glass Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Machinery and Equipment Manufacturing and Repairing, Industrial Machinery.
 
● 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:
None.
 
● 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, Textiles Mills, Fabric Mills , Apparel, Clothing Accessories and Other Textile Product Manufacturing , Paper Manufacturing, Screw, Nut Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Transport Equipment Manufacturing and Repairing, Motor Parts Manufacturing, Bicycles Manufacturing, Precision Instruments Manufacturing, Construction, Wholesale, Banks, Transportation and Storage.
 
● Manufacturers' sentiments that have improved in the January survey and is expected to deteriorate over the next six months include:
None.
 
● Manufacturers' sentiments that have improved in the January survey and is expected to remain upbeat over the next six months include:
Chemical Products Manufacturing, Electrical Appliances and Housewares Manufacturing, Insurance.
 
● Manufacturers' sentiments that have improved in the January survey and the trend is expected to continue for the next six months include:
Food, Slaughtering, Frozen Food Manufacturing, Edible Oil Manufacturing, Flour Milling and Grain Husking , Soft Drink Manufacturing , Prepared Animal Feeds Manufacturing, Leather, Fur and Allied Product Manufacturing, Wood and Bamboo Products Manufacturing, Plastics and Rubber Raw Materials, Rubber Products Manufacturing, Plastic Products Manufacturing, Motor Vehicles Manufacturing, Bicycles Parts Manufacturing, Education and Entertainment Articles Manufacturing, Real Estate Investment, Retail Sales, Restaurants and Hotels, Securities.

 

 
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