The Taiwanese Economy in October 2018

Despite the fact that European and Japanese economic recovery still remains, the growth momentum is hardly solid. It is also very evident that the Chinese economic growth has been slowing down with respect to its internal financial troubles and external tensions with the US. The plunging of global crude oil prices and the Fed's continuous tightening measures further ramp up the uncertainties. As a result, the service and manufacturing composite indicators issued by the Taiwan Institute of Economic Research (TIER) decline for the third consecutive month.
Taiwan's exports in October 2018 increased by 7.35% compared with the same month of 2017. Regarding imports, Taiwan's imports in October 2018 increased by 17.64% compared with imports in October 2017. Exports and imports grew by 8.0% and 12.5% y-o-y respectively from January 1st till the end of October this year, Taiwan's exports and imports gave a trade surplus of US$ 40.05 billion or a decrease by 12.88% on a y-o-y basis for the first 10 months of this year.
Taiwan's consumer price index (CPI) grew by 1.17% in October 2018 compared with the same month of previous year. The core inflation rate excluding prices of the energy and food grew by 0.72% in October, 2018. In addition, the wholesale price index (WPI) moved up by 5.95% in October 2018 on the year-on-year basis. On the cumulative basis, the CPI went up by 1.60% and WPI went up by 4.01% from January 1st till October 31st 2018 compared with the same period last year.
As for exchange rate, the NTD went weaker due to the relatively stronger USD, as the Fed is likely to continue its rate hiking cycle and capital continued to flow out. Anyway, the NTD/USD stood at 30.968 in late October 2018 indicating a 1.36% depreciation. Regarding the interest rate, it remained low and steady in October2018 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 October 2018 stood at 0.177% and 0.189% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 20.0% or increased by 9.2 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 37.5% or decreased by 4.5 percentage points than 42.0% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 42.6% or decreased by 4.6 percentage points compared with 47.2% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was not as pessimistic as previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 7.2% in the target month or decreased by 6.4 percentage points than 13.6% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 39.6% or increased by 6.7 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 53.3% or decreased by 0.2 percentage points compared with 53.5% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was somewhat more pessimistic than the previous month.
The manufacturing composite indicator for October, 2018 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 93.46 points in September moved down to 88.35 points in October. Figure 1 shows a decrease of 5.11 points, the third month of consecutive decline.
The TIER service sector composite indicator for October, 2018 adjusted for seasonal factors on moving average, also saw a downward correlation, and from a revision of as 95.55 points in September moved down to 90.80 points in October. Figure 1 shows a decrease of 4.75 points, also the third month of consecutive decline.
In addition, the TIER Construction Sector Composite Indicator for October, 2018 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of 95.15 points in September went up to 97.19 points in October. Figure 1 shows an increase of 2.04 points, the first mount after a one-month dip.

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