The Taiwanese Economy in February 2018

The global economic outlook seems promising with strong support by outstanding performances of the US, Europe, and emerging markets. However, the possible trade war between the US and China could be the biggest uncertainty hindering the recovery of the world economy. Due to seasonal and base effects, all three composite indicators issued by the Taiwan Institute of Economic Research (TIER) dipped at the same time.
Taiwan's exports of January and February 2018 increased by 7.26% compared with the period of 2017. Regarding imports, Taiwan's imports of January and February 2018 increased by 11.72% compared with imports of January and February 2017. Taiwan's exports and imports of January and February 2018 gave a trade surplus of US$ 5.6 billion or a decrease by 18.39% on a year-on-year basis.
Because of the lunar new year with base period distortion, Taiwan's consumer price index (CPI) went up by 2.19% in February 2018 compared with the same month of previous year. The core inflation rate stood at 2.39% in February 2018. In addition, the wholesale price index (WPI) moved down by 0.27% in February 2018 on the year-on-year basis. In a nutshell, the current inflation is caused mainly by the seasonal reason.
As for exchange rate, the NTD went strong first and turned weaker later, despite the Fed has decided to conduct tightening measures by schedule. Nonetheless, the NTD/USD stood at 29.23 in late February 2018 indicating a 0.27% depreciation. Regarding the interest rate, it remained low and steady in February 2018 due to the continued loose monetary operations by the CBC with respect to the most recent economic performance and exchange rate of NTD; the lowest and highest over-night call rate in February 2018 stood at 0.176% and 0.187% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 16.1% or decreased by 14.3 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 42.1% or increased by 25.9 percentage points than 16.2% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 41.8% or decreased by 11.6 percentage points compared with 53.4% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was rather pessimistic.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 49.7% in the target month or increased by 15.0 percentage points than 34.7% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 8.1% or decreased by 3.2 percentage points compared with 11.3% 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 42.2% or decreased by 11.9 percentage points compared with 54.1% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also somewhat more optimistic.
The manufacturing composite indicator for February, 2018 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 100.19 points in January moved down to 98.33 points in February 2018. Figure 1 shows a decrease of 1.86 points.
The TIER service sector composite indicator for February 2018 adjusted for seasonal factors on moving average, saw a downward correlation, and from a revision of as 93.74 points in January moved down to 93.22 points in February 2018. Figure 1 shows a decrease of 0.52 points.
In addition, the TIER Construction Sector Composite Indicator for February 2018 adjusted for seasonal factors on moving average also saw a downward correction, and from a revision of 105.17 points in January went down to 101.99 points in February 2018. Figure 1 shows a decrease of 3.18 points.

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