The Taiwanese Economy in May 2018

The global economic growth remains strong, and the recovery is on the right track with respect to the only and biggest uncertainty, potential conflicts in trade between the US and its trading partners. Nevertheless, fueled by the global conditions, Taiwan's economic outlook seems like very promising for the time being.
Taiwan's exports in May 2018 increased significantly by 14.16% compared with the same month of 2017. Regarding imports, Taiwan's imports in May 2018 increased by 12.03% compared with imports in May 2017. Exports and imports grew by 11.24% and 9.94% y-o-y respectively from January 1st till the end of May this year, Taiwan's exports and imports gave a trade surplus of US$ 20.34 billion or an increase by 19.21% on a y-o-y basis for the first 5 months of this year.
Taiwan's consumer price index (CPI) stood at 1.64% in May 2018 compared with the same month of previous year. The core inflation rate stood at 0.95% in May, 2018. In addition, the wholesale price index (WPI) moved up by 5.61% in May 2018 on the year-on-year basis. On the cumulative basis, the CPI went up by 1.66% and WPI went up by 1.53% from January 1st till May 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 had sent out its certain hawkish messages and hot money continued to flow out. Anyway, the NTD/USD stood at 29.98 in late May 2018 indicating a 1.27% depreciation. Regarding the interest rate, it remained low and steady in May 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 May 2018 stood at 0.179% and 0.192% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 37.4% or increased by 8.0 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 11.6% or decreased by 14.9 percentage points than 26.5% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 51.0% or increased by 6.9 percentage points compared with 44.1% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was rather optimistic.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 31.0% in the target month or decreased by 3.8 percentage points than 34.8% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 10.5% or decreased by 2.1 percentage points compared with 12.6% 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 58.4% or increased by 5.8 percentage points compared with 52.6% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was somewhat neutral.
The manufacturing composite indicator for May, 2018 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 98.33 points in April moved up to 101.69 points in May Figure 1 shows an increase of 3.36 points, the first increase after previous decline.
The TIER service sector composite indicator for May, 2018 adjusted for seasonal factors on moving average, also however saw an upward correlation, and from a revision of as 95.01 points in April moved up to 96.9 points in May. Figure 1 shows an increase of 1.89 points, a consecutive three-month increase.
In addition, the TIER Construction Sector Composite Indicator for May 2017 adjusted for seasonal factors on moving average nevertheless saw a downward correction, and from a revision of 95.22 points in April went down to 94.89 points in May. Figure 1 shows a decrease of 0.33 points, a fourth month consecutive decline.

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