The Taiwanese Economy in September 2019

The trade tension between the US and China could come to an end during the upcoming APEC meetings in November this year. A partial trade deal could be signed by both sides; however, uncertainties still remain as mutual trust of DC and Beijing is missing and not easy to rebuilt. As a result, the global demand remains weak, and the composite indicators issued by the Taiwan Institute of Economic Research (TIER) declined simultaneously.
Taiwan's exports in September 2019 decreased by 4.63% compared with the same month of 2018, ended a very brief one-month increase. The exports to the US market increased by significantly 8.6% y-o-y, whereas exports to China decreased by 5.5% y-o-y. Regarding imports, Taiwan's imports in September 2019 decreased by 0.57% compared with imports in September of 2018. On the cumulated basis, exports and imports from January till the end of September this year gave a trade surplus of US$ 32.75 billion or decreased by 10.32% on a y-o-y basis.
Taiwan's consumer price index (CPI) increased by only 0.43% in September 2019 compared with the same month of previous year due to the supply of vegetables and fruits was somewhat impacted by severe weather in September causing higher prices of fruits and vegetables. The core inflation rate excluding prices of the energy and food grew by 0.52% in September 2019. In addition, the wholesale price index (WPI) moved down by 4.53% in September 2019 on the year-on-year basis due to the fact that commodity prices dropped significantly.
As for exchange rate, the NTD similar to all other major currencies in the world went somewhat stronger due to the relatively stronger USD, despite the Fed cut the federal funds rate by 0.25 percentage points on 19th September 2019, the second time this year. The NTD/USD stood at 31.04 in late September 2019 indicating a 1.17% appreciation. Regarding the interest rate, it remained low and steady in September 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 September 2019 stood at 0.171% and 0.184% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 18.7% or decreased by 6.5 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 39.0% or increased by 11.0 percentage points than 28.0% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 42.3% or decreased by 4.0 percentage points compared with 46.3% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was more pessimistic than the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 17.4% in the target month or increased by 3.4 percentage points than 14.0% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 20.2% or decreased by 6.4 percentage points compared with 26.6% 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 62.4% or increased by 3.6 percentage points compared with 58.8% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was somewhat optimistic compared with the previous month.
The manufacturing composite indicator for September 2019 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 95.94 points in August 2019 moved down to 94.67 points. Figure 1 shows a decrease of 1.27 points, the first dip after two months of increase in a row.
The TIER service sector composite indicator for September 2019 adjusted for seasonal factors on moving average also saw a downward correlation, and from a revision of as 90.90 points in August 2019 moved down to 89.23 points. Figure 1 shows a decrease of 1.67 points.
In addition, the TIER Construction Sector Composite Indicator for September 2019 adjusted for seasonal factors on moving average, saw a downward correction as well, and from a revision of 100.36 points in August 2019 went down to 97.96 points. Figure 1 shows a decrease of 2.40 points, the first drop after four months of consecutive 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 September survey and are expected to deteriorate over the next six months include:
Yarn Spinning Mills, Wood and Bamboo Products Manufacturing, Man-made Fibers Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery.
　
● Manufacturers' sentiments that have been in decline in the September survey, but are expected to improve over the next six months include:
Electrical Machinery, Electrical Appliances and Housewares Manufacturing, Insurance.
　
● Manufacturers' sentiments that have been in decline in the September survey and are expected to remain sluggish over the next six months include:
Paper Manufacturing, Industrial Chemicals, Petrochemicals Manufacturing, Plastics and Rubber Raw Materials, Chemical Products Manufacturing, Petroleum and Coal Products Manufacturing, Plastic Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Metal Structure and Architectural Components Manufacturing, Electric Wires and Cables Manufacturing, Wholesale.
　
● Manufacturers surveyed who felt the September outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Motorcycles Manufacturing, Motorcycles Parts Manufacturing.
　
● Manufacturers surveyed who felt the September outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Printing, Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing, Electrical Machinery, Supplies Manufacturing and Repairing, Communications Equipment and Apparatus Manufacturing, Motor Parts Manufacturing, Bicycles Manufacturing, Precision Instruments Manufacturing, Retail Sales, Securities.
　
● Manufacturers surveyed who felt the September outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Slaughtering, Frozen Food Manufacturing, Prepared Animal Feeds Manufacturing, Textiles Mills, Rubber Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Electronic Machinery, Audio and Video Electronic Products Manufacturing, Electronic Parts and Components Manufacturing, Transport Equipment Manufacturing and Repairing, Bicycles Parts Manufacturing, Education and Entertainment Articles Manufacturing, Construction, Restaurants and Hotels, Banks, Telecommunication Services, Transportation and Storage.
　
● Manufacturers' sentiments that have improved in the September survey and is expected to deteriorate over the next six months include:
Motor Vehicles Manufacturing.
　
● Manufacturers' sentiments that have improved in the September survey and is expected to remain upbeat over the next six months include:
Apparel, Clothing Accessories and Other Textile Product Manufacturing .
　
● Manufacturers' sentiments that have improved in the September survey and the trend is expected to continue for the next six months include:
Food, Edible Oil Manufacturing, Flour Milling and Grain Husking , Soft Drink Manufacturing , Fabric Mills , Leather, Fur and Allied Product Manufacturing, Glass and Glass Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Basic Civil Structure Construction, Real Estate Investment.