The Taiwanese Economy in July 2018

Like the Federal Reserve's recent FOMC statement mentioned that the US economic activity had been rising at a strong rate outperforming all other major economies in the world. The European Union, China, and Japan on the other hand have been slowing down in growth due to different causes. The Taiwan Institute of Economic Research (TIER) issued manufacturing, service sector, and construction sector composite indicators on the 24th August 2018, whereas all 3 indicators go up signifying a momentary upbeat in Taiwan's economic performance.
Taiwan's exports in July 2018 increased by 4.71% compared with the same month of 2017. Regarding imports, Taiwan's imports in July 2018 increased by 20.45% compared with imports in July 2017. Exports and imports grew by 9.93% and 12.24% y-o-y respectively from January 1st till the end of July this year, Taiwan's exports and imports gave a trade surplus of US$ 27.79 billion or a decrease by 1.84% on a y-o-y basis for the first 7 months of this year.
Taiwan's consumer price index (CPI) grew by 1.75% in July 2018 compared with the same month of previous year. The core inflation rate excluding prices of the energy and food grew by 1.50% in July, 2018. In addition, the wholesale price index (WPI) moved up by 7.02% in July 2018 on the year-on-year basis. On the cumulative basis, the CPI went up by 1.65% and WPI went up by 2.99% from January 1st till July 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 30.61 in late July 2018 indicating a 0.37% depreciation. Regarding the interest rate, it remained low and steady in July 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 July 2018 stood at 0.184% and 0.191% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 26.2% or decreased by 0.9 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 20.5% or decreased by 2.8 percentage points than 23.3% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 53.3% or increased by 3.6 percentage points compared with 49.7% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was rather neutral.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 24.0% in the target month or decreased by 2.8 percentage points than 26.8% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 15.5% or decreased by 0.8 percentage points compared with 16.3% 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 60.5% or increased by 3.5 percentage points compared with 57.0% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also somewhat neutral.
The manufacturing composite indicator for July, 2018 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 100.39 points in June moved up to 101.74 points in July. Figure 1 shows an increase of 1.35 points, the first increase after a decline.
The TIER service sector composite indicator for July, 2018 adjusted for seasonal factors on moving average, also saw an upward correlation, and from a revision of as 97.05 points in June moved up to 100.43 points in July. Figure 1 shows an increase of 3.38 points, the first increase after a decline as well.
In addition, the TIER Construction Sector Composite Indicator for July 2017 adjusted for seasonal factors on moving average nevertheless saw an upward correction, too, and from a revision of 97.64 points in June went up to 98.51 points in July. Figure 1 shows an increase of 0.87 points, a two-month consecutive mount.

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