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2019.6.25
Worsening trade war makes the global economy more uncertain
Headwinds facing the economy of Taiwan; export orders fall for a seventh straight month in May

The Taiwanese Economy in May 2019

In May of 2019, it seemed that the trade conflicts between the US and China worsened. The deteriorating relations between the world market and world factory made the ambiguous global economy even more uncertain. As a result, Taiwan's export orders fell for a seventh straight month in May.
Taiwan's exports in May 2019 decreased by 4.77% compared with the same month of 2018, and it is the 7th-month consecutive decrease. Regarding imports, Taiwan's imports in May 2019 decreased by 5.92% compared with imports in May 2018. On the cumulated basis, exports and imports from January till the end of May this year gave a trade surplus of US$ 16.08 billion or decreased by 20.91% on a y-o-y basis.
Taiwan's consumer price index (CPI) increased by 0.94% in May 2019 compared with the same month of previous year. The core inflation rate excluding prices of the energy and food grew by 0.62% in May 2019. In addition, the wholesale price index (WPI) moved down by 0.23% in May 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 backed by stronger US economic performance. The NTD/USD stood at 31.615 in late May 2019 indicating a 2.28% depreciation. Regarding the interest rate, it remained low and steady in May 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 May 2019 stood at 0.175% and 0.217% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 25.1% or increased by 3.5 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 32.8% or increased by 6.6 percentage points than 26.2% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 42.1% or decreased by 10.0 percentage points compared with 52.1% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was somewhat pessimistic than the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 17.7% in the target month or decreased by 13.2 percentage points than 30.9% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 26.8% or increased by 5.6 percentage points compared with 21.1% 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 55.5% or decreased by 7.7 percentage points compared with 47.8% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also somewhat rather pessimistic than the previous month.
The manufacturing composite indicator for May 2019 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 94.59 points in April 2019 moved down to 94.44 points. Figure 1 shows a decrease of 0.15 points, the second month of decline.
The TIER service sector composite indicator for May 2019 adjusted for seasonal factors on moving average, saw an upward correlation, and from a revision of as 96.70 points in April 2019 moved up to 98.22 points. Figure 1 shows an increase of 1.52 points, the first increase after a one-month dip.
In addition, the TIER Construction Sector Composite Indicator for May 2019 adjusted for seasonal factors on moving average, also saw an upward correction, and from a revision of 90.66 points in April 2019 went up to 93.96 points. Figure 1 shows an increase of 3.30 points, the first increase after a two-month of consecutive decrease.

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 May survey and are expected to deteriorate over the next six months include:
Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Securities.
 
● Manufacturers' sentiments that have been in decline in the May survey, but are expected to improve over the next six months include:
Bicycles Manufacturing, Bicycles Parts Manufacturing.
 
● Manufacturers' sentiments that have been in decline in the May survey and are expected to remain sluggish over the next six months include:
Metal Structure and Architectural Components Manufacturing.
 
● Manufacturers surveyed who felt the May 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, Plastics and Rubber Raw Materials, Man-made Fibers Manufacturing, Glass and Glass Products Manufacturing, Electric Wires and Cables Manufacturing, Motor Parts Manufacturing.
 
● Manufacturers surveyed who felt the May outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Fabric Mills , Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing, Precision Instruments Manufacturing, Retail Sales.
 
● Manufacturers surveyed who felt the May 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, Soft Drink Manufacturing , Textiles Mills, Yarn Spinning Mills, Apparel, Clothing Accessories and Other Textile Product Manufacturing , Leather, Fur and Allied Product Manufacturing, Wood and Bamboo Products Manufacturing, Paper Manufacturing, Chemical Products Manufacturing, Rubber Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Electrical Machinery, Electrical Appliances and Housewares Manufacturing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Motorcycles Parts Manufacturing, Education and Entertainment Articles Manufacturing, Construction, Basic Civil Structure Construction, Wholesale, Banks, Telecommunication Services, Transportation and Storage.
 
● Manufacturers' sentiments that have improved in the May survey and is expected to deteriorate over the next six months include:
Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing.
 
● Manufacturers' sentiments that have improved in the May survey and is expected to remain upbeat over the next six months include:
Electrical Machinery, Supplies Manufacturing and Repairing.
 
● Manufacturers' sentiments that have improved in the May survey and the trend is expected to continue for the next six months include:
Edible Oil Manufacturing, Flour Milling and Grain Husking , Prepared Animal Feeds Manufacturing, Printing, Petroleum and Coal Products Manufacturing, Plastic Products Manufacturing, Audio and Video Electronic Products Manufacturing, Motorcycles Manufacturing, Real Estate Investment, Restaurants and Hotels, Insurance.

 

 
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