The Taiwanese Economy in August 2019

Uncertainties related to the continuing trade conflicts between the US and China has pressured the global growth momentum further. However, certain number of Taiwanese businesses operating in China are planning to move their operations back to Taiwan. As a result, the private capital formation can be the most significant engine driving Taiwan's economic growth for this year and the future.
Taiwan's exports in August 2019 increased by 2.81% compared with the same month of 2018, ended a very brief one-month decrease. The exports to the US market increased by significantly 23.2% y-o-y, whereas exports to China also increased by 1.0% y-o-y ending a 9-month consecutive decline in August. Regarding imports, Taiwan's imports in August 2019 decreased by 3.11% compared with imports in August of 2018. On the cumulated basis, exports and imports from January till the end of August this year gave a trade surplus of US$ 29.60 billion or decreased by 7.96% on a y-o-y basis.
Taiwan's consumer price index (CPI) increased by only 0.43% in August 2019 compared with the same month of previous year due to the supply of vegetables and fruits was somewhat impacted by severe weather in August causing higher prices of fruits and vegetables. The core inflation rate excluding prices of the energy and food grew by 0.39% in August 2019. In addition, the wholesale price index (WPI) moved down by 3.44% in August 2019 on the year-on-year basis due to the fact that commodity prices dropped significantly.
As for exchange rate, the NTD similar to all other major currencies in the world went somewhat weaker due to the relatively stronger USD, despite the Fed cut the federal funds rate by 0.25 percentage points in September 2019, the second time this year. The NTD/USD stood at 31.41 in late August 2019 indicating a 1.01% depreciation. Regarding the interest rate, it remained low and steady in August 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 August 2019 stood at 0.176% and 0.185% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 26.6% or decreased by 3.0 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 29.8% or increased by 7.0 percentage points than 22.8% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 42.9% or decreased by 4.8 percentage points compared with 47.7% 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 14.6% in the target month or decreased by 5.6 percentage points than 20.2% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 24.4% or decreased by 0.1 percentage points compared with 24.5% 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 60.3% or increased by 4.9 percentage points compared with 55.4% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was somewhat neutral compared with the previous month.
The manufacturing composite indicator for August 2019 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 94.98 points in July 2019 moved up to 96.14 points. Figure 1 shows an increase of 1.16 points, the second month of increase in a row.
The TIER service sector composite indicator for August 2019 adjusted for seasonal factors on moving average, however saw a downward correlation, and from a revision of as 92.62 points in Julye 2019 moved down to 91.16 points. Figure 1 shows a decrease of 1.46 points.
In addition, the TIER Construction Sector Composite Indicator for August 2019 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of 98.09 points in July 2019 went up to 100.35 points. Figure 1 shows an increase of 2.26 points, the fourth month of increase in a row.

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