The Taiwanese Economy in June 2019

The trade spat between the US and China has continued, whereas a talk will be conducted in late July. Nevertheless, a truce is still very uncertain. Trade diversion effects provide pros and cons to the economy of Taiwan. Its exports to China and Hong Kong have been decreasing, but they to the US market have been increasing. In addition, the homecoming Taiwanese investments could help pick up the growth of fixed capital formation. In summary, the negative impacts are somewhat balanced by the new-fangled benefits. As a result, the Taiwan Institute of Economic Research (TIER) forecasts that Taiwan's GDP will grow by 2.12% in 2019 compared with last year's, which is consistent with TIER's previous predictions in April as well as January this year.
Taiwan's exports in June 2019 increased by 0.51% compared with the same month of 2018, ended the 7th-month consecutive decrease. Regarding imports, Taiwan's imports in June 2019 increased by 6.57% compared with imports in June 2018. On the cumulated basis, exports and imports from January till the end of June this year gave a trade surplus of US$ 19.94 billion or decreased by 22.02% on a y-o-y basis.
Taiwan's consumer price index (CPI) increased by 0.86% in June 2019 compared with the same month of previous year. The core inflation rate excluding prices of the energy and food grew by 0.48% in June 2019. In addition, the wholesale price index (WPI) moved down by 1.93% in June 2019 on the year-on-year basis.
As for exchange rate, the NTD similar to all other major currencies in the world went somewhat stronger due to the relatively weaker USD caused by the Fed's dovish announcement. The NTD/USD stood at 31.072 in late June 2019 indicating a 1.71% appreciation. Regarding the interest rate, it remained low and steady in June 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 June 2019 stood at 0.185% and 0.224% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 25.0% or increased by 1.4 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 33.1% or increased by 1.9 percentage points than 31.2% 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 decreased by 3.3 percentage points compared with 45.2% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was neutral than the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 24.6% in the target month or increased by 5.6 percentage points than 19.0% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 18.6% or decreased by 7.2 percentage points compared with 25.8% 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 56.8% or increased by 1.6 percentage points compared with 55.2% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also somewhat optimistic to neutral compared with the previous month.
The manufacturing composite indicator for June 2019 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 94.62 points in May 2019 moved down to 93.03 points. Figure 1 shows a decrease of 1.59 points, the third month of decline.
The TIER service sector composite indicator for June 2019 adjusted for seasonal factors on moving average, saw an upward correlation, and from a revision of as 97.87 points in May 2019 moved down to 92.43 points. Figure 1 shows a decrease of 5.44 points, the first dip after a one-month mount.
In addition, the TIER Construction Sector Composite Indicator for June 2019 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of 93.47 points in May 2019 went up to 97.81 points. Figure 1 shows an increase of 4.34 points, the second month of increase.

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

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