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2020.2.25
Corona virus as a new uncertainty threatening the global economic recovery
TIER composite indicators all signaled pessimism

The Taiwanese Economy in January 2020

Despite the fact that the US and China finally signed the phase one treaty clamping down a long-lasting uncertainty for the time being, a new form of corona virus emerges as a new uncertainty threatening and potentially hindering the global economic recovery. Accordingly, all three composite indicators issued by the Taiwan Institute Economic Research (TIER) all went down signaling pessimism for business outlook in the near future.
Taiwan's exports in January 2020 decreased by significantly 7.57% compared with the same month of 2019. Regarding imports, Taiwan's imports in January 2020 also decreased by 17.66% compared with imports in January of 2019 given the imports of equipment increased by 2.7%.
Taiwan's consumer price index (CPI) increased by only 1.85% in January 2020 compared with the same month of previous year due to the prices of most consumption goods were relatively higher with respect to the increasing demand of lunar new year compared with lower base effect of 2019. The core inflation rate excluding prices of the energy and food grew by 1.33% in January 2020. In addition, the wholesale price index (WPI) moved down by 3.11% in January 2020 on the year-on-year basis due to the fact that commodity prices dropped continuously.
As for exchange rate, the NTD similar to all other major currencies in the world went somewhat weaker due to the relatively stronger USD. The NTD/USD stood at 30.25 in late January 2020 indicating a 0.48% depreciation. Regarding the interest rate, it remained low and steady in January 2020 due to the continued loose monetary operations by the CBC with respect to the most recent CPI reading; the lowest and highest over-night call rate in January 2020 stood at 0.171% and 0.229% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 11.1% or decreased 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 48.0% or increased by 24.5 percentage points than 23.5% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 40.9% or decreased by 8.1 percentage points compared with 49.0% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was more pessimistic than the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 26.0% in the target month or decreased by 6.7 percentage points than 32.7% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 26.4% or increased by 7.0 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 47.6% or decreased by 0.3 percentage points compared with 47.9% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also more optimistic compared with the previous month due to the uncertain impacts of corona virus.
The manufacturing composite indicator for January 2020 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 96.39 points in December 2019 moved down to 94.16 points. Figure 1 shows a decrease of 2.23 points, the first dip after a two-month increase.
The TIER service sector composite indicator for January 2020 adjusted for seasonal factors on moving average saw a downward correlation, and from a revision of as 91.78 points in December 2019 moved down to 88.63 points. Figure 1 shows a decrease of 3.15 points, the first decline after a one-month hike.
In addition, the TIER Construction Sector Composite Indicator for January 2020 adjusted for seasonal factors on moving average, also saw a downward correction, and from a revision of 103.44 points in December 2019 went down to 95.03 points. Figure 1 shows a decrease of 8.41 points.

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, Leather, Fur and Allied Product Manufacturing, Wood and Bamboo Products Manufacturing, Industrial Chemicals, Petrochemicals Manufacturing, Plastics and Rubber Raw Materials, Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Glass and Glass Products Manufacturing, Cement and Cement Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Data Storage Media Units Manufacturing and Reproducing, Motor Parts Manufacturing, Wholesale, Securities, Telecommunication Services.
 
● Manufacturers' sentiments that have been in decline in the January survey, but are expected to improve over the next six months include:
Fabric Mills , Electronic Machinery, Bicycles Manufacturing, Bicycles Parts Manufacturing.
 
● Manufacturers' sentiments that have been in decline in the January survey and are expected to remain sluggish over the next six months include:
Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain Husking , Soft Drink Manufacturing , Prepared Animal Feeds Manufacturing, Textiles Mills, Man-made Fibers Manufacturing, Chemical Products Manufacturing, Rubber Products Manufacturing, Plastic Products Manufacturing, Fabricated Metal Products Manufacturing, Metal Dies, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electric Wires and Cables Manufacturing, Audio and Video Electronic Products Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Construction, Basic Civil Structure Construction, Real Estate Investment.
 
● 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:
Petroleum and Coal Products Manufacturing.
 
● 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:
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, Frozen Food Manufacturing, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Paper Manufacturing, Iron and Steel Basic Industries, Screw, Nut Manufacturing, Electrical Appliances and Housewares Manufacturing, Communications Equipment and Apparatus Manufacturing, Motorcycles Parts Manufacturing, Education and Entertainment Articles Manufacturing, Retail Sales, Banks, Insurance, Transportation and Storage.
 
● Manufacturers' sentiments that have improved in the January survey and is expected to deteriorate over the next six months include:
Restaurants and Hotels.
 
● Manufacturers' sentiments that have improved in the January survey and is expected to remain upbeat over the next six months include:
None.
 
● Manufacturers' sentiments that have improved in the January survey and the trend is expected to continue for the next six months include:
Printing, Motorcycles Manufacturing.

 

 
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