The Taiwanese Economy in December 2018

Referring to leading indicators issued by major global agencies, we may again conclude that the world demands are shrinking still with palpitations in financial markets and other signs of headwinds. As a result, the Taiwan Institute of Economic Research (TIER) renewed its forecast for Taiwan's economic growth rate for 2019 on 25th January. The rate is now predicted to be 2.12% representing 0.08 percentage points lower than TIER's previous outlook.
Taiwan's exports in December 2018 decreased by 3.04% compared with the same month of 2017. Regarding imports, Taiwan's imports in December 2018 increased by 2.23% compared with imports in December 2017. Exports and imports grew by 5.92% and 10.55% y-o-y respectively from January 1st till the end of last year, Taiwan's exports and imports gave a trade surplus of US$ 49.41 billion or a decrease by 14.79% on a y-o-y basis for the entire year.
Taiwan's consumer price index (CPI) dipped by 0.31% in December 2018 compared with the same month of previous year. The core inflation rate excluding prices of the energy and food grew by 0.52% in December, 2018. In addition, the wholesale price index (WPI) moved up by 0.83% in December 2018 on the year-on-year basis. On the cumulative basis, the CPI went up by 1.35% and WPI went up by 3.64% throughout the entire year of 2018 compared with the previous year.
As for exchange rate, the NTD similar to all other major currencies in the world went somewhat stronger due to the relatively weaker USD, as the Fed is likely to turn more dovish in the future. Anyway, the NTD/USD stood at 30.733 in late December 2018 indicating a 0.38% appreciation. Regarding the interest rate, it remained low and steady in December 2018 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 December 2018 stood at 0.174% and 0.188% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 13.8% 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 44.3% or decreased by 4.8 percentage points than 49.1% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 41.9% or increased by 1.3 percentage points compared with 40.6% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was less pessimistic than the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 18.7% in the target month or increased by 2.4 percentage points than 16.3% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 34.2% or increased by 6.9 percentage points compared with 27.3% 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 47.1% or decreased by 9.3 percentage points compared with 56.4% 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 December, 2018 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 85.57 points in November moved up to 85.72 points in December. Figure 1 shows an increase of 0.15 points, the first up after four-month of consecutive decline.
The TIER service sector composite indicator for December, 2018 adjusted for seasonal factors on moving average, also saw an upward correlation, and from a revision of as 90.78 points in November moved up to 91.02 points in December. Figure 1 shows an increase of 0.24 points, also the first up after four-month of consecutive decline.
In addition, the TIER Construction Sector Composite Indicator for December, 2018 adjusted for seasonal factors on moving average, saw an upward correction as well, and from a revision of 92.78 points in November went up to 94.62 points in December. Figure 1 shows an increase of 1.84 points, the first up 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 December survey and are expected to deteriorate over the next six months include:
Yarn Spinning Mills, Industrial Chemicals, Petrochemicals Manufacturing, Petroleum and Coal Products Manufacturing, Iron and Steel Basic Industries, Audio and Video Electronic Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Motor Parts Manufacturing, Motorcycles Manufacturing, Motorcycles Parts Manufacturing.
　
● Manufacturers' sentiments that have been in decline in the December survey, but are expected to improve over the next six months include:
None.
　
● Manufacturers' sentiments that have been in decline in the December survey and are expected to remain sluggish over the next six months include:
Slaughtering, Prepared Animal Feeds Manufacturing, Paper Manufacturing, Man-made Fibers Manufacturing, Rubber Products Manufacturing, Electric Wires and Cables Manufacturing, Electrical Appliances and Housewares Manufacturing, Electronic Machinery, Electronic Parts and Components Manufacturing, Precision Instruments Manufacturing, Real Estate Investment, Wholesale, Insurance.
　
● Manufacturers surveyed who felt the December outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Plastics and Rubber Raw Materials, Porcelain and Ceramic Products Manufacturing, Glass and Glass Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Transport Equipment Manufacturing and Repairing.
　
● Manufacturers surveyed who felt the December outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Cement and Cement Products Manufacturing.
　
● Manufacturers surveyed who felt the December outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Edible Oil Manufacturing, Flour Milling and Grain Husking , Textiles Mills, Fabric Mills , Apparel, Clothing Accessories and Other Textile Product Manufacturing , Leather, Fur and Allied Product Manufacturing, Chemical Products Manufacturing, Plastic Products Manufacturing, Non-metallic Mineral Products Manufacturing, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Metal Structure and Architectural Components Manufacturing, Communications Equipment and Apparatus Manufacturing, Bicycles Manufacturing, Construction, Banks, Securities, Telecommunication Services, Transportation and Storage.
　
● Manufacturers' sentiments that have improved in the December survey and is expected to deteriorate over the next six months include:
Motor Vehicles Manufacturing, Bicycles Parts Manufacturing, Restaurants and Hotels.
　
● Manufacturers' sentiments that have improved in the December survey and is expected to remain upbeat over the next six months include:
Wood and Bamboo Products Manufacturing, Basic Civil Structure Construction.
　
● Manufacturers' sentiments that have improved in the December survey and the trend is expected to continue for the next six months include:
Food, Frozen Food Manufacturing, Soft Drink Manufacturing, Education and Entertainment Articles Manufacturing, Retail Sales.

TITIER Forecast (issued on 25th January, 2019.)
(NT$100 million, Chained (2011) Dollars)