The Taiwanese Economy in November 2019

The phase-one deal between the US and China is scheduled to be signed in early January of 2020. The US postponed the tariff hike on Chinese imported consumption goods, whereas China called off its retaliation measures. The temporary truce between the US and China is expected to revive the global trade. Since said uncertainty somewhat subsides, the manufacturing composite indicator issued by the Taiwan Institute Economic Research (TIER) increased after two-month decrease in a row.
Taiwan's exports in November 2019 increased by 3.25% compared with the same month of 2018. The exports to the US market increased by significantly 16.9% y-o-y, whereas exports to China increased by 6.9% y-o-y in November 2019. Regarding imports, Taiwan's imports in November 2019 increased by 5.8% compared with imports in November of 2018. On the cumulated basis, exports and imports from January till the end of November this year gave a trade surplus of US$ 40.98 billion or decreased by 8.01% on a y-o-y basis.
Taiwan's consumer price index (CPI) increased by only 0.59% in November 2019 compared with the same month of previous year due to the prices of vegetables and fruits was relatively higher compared with lower base effect last year in addition to rebound of oil prices; however, the overall price level was offset by the significantly dropping process of transportation and communication costs. The core inflation rate excluding prices of the energy and food grew by 0.64% in November 2019. In addition, the wholesale price index (WPI) moved down by 5.04% in November 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 weaker due to the relatively stronger USD. The NTD/USD stood at 30.513 in late November 2019 indicating a 0.17% depreciation. Regarding the interest rate, it remained low and steady in November 2019 due to the continued loose monetary operations by the CBC with respect to the most recent CPI reading; the lowest and highest over-night call rate in November 2019 stood at 0.172% and 0.185% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 18.4% or decreased by 2.7 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 27.6% or decreased by 7.1 percentage points than 34.7% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 54.1% or increased by 10.0 percentage points compared with 44.1% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was somewhat a little bit more optimistic than the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 23.0% in the target month or increased by 5.5 percentage points than 17.5% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 17.8% or decreased by 12.0 percentage points compared with 29.8% 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 59.3% or increased by 6.6 percentage points compared with 52.7% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was rather optimistic compared with the previous month.
The manufacturing composite indicator for November 2019 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 92.13 points in October 2019 moved up to 93.42 points. Figure 1 shows an increase of 1.29 points, the first increase after two-month decrease in a row.
The TIER service sector composite indicator for November 2019 adjusted for seasonal factors on moving average saw a downward correlation, and from a revision of as 88.06 points in October 2019 moved down to 87.52 points. Figure 1 shows a decrease of 0.54 points.
In addition, the TIER Construction Sector Composite Indicator for November 2019 adjusted for seasonal factors on moving average, also saw a downward correction, and from a revision of 102.50 points in October 2019 went down to 101.55 points. Figure 1 shows a decrease of 0.95 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 November survey and are expected to deteriorate over the next six months include:
Yarn Spinning Mills, Wood and Bamboo Products Manufacturing, Man-made Fibers Manufacturing, Motorcycles Parts Manufacturing.
　
● Manufacturers' sentiments that have been in decline in the November survey, but are expected to improve over the next six months include:
Fabric Mills , Audio and Video Electronic Products Manufacturing, Bicycles Manufacturing.
　
● Manufacturers' sentiments that have been in decline in the November survey and are expected to remain sluggish over the next six months include:
Textiles Mills, Leather, Fur and Allied Product Manufacturing, Industrial Chemicals, Petroleum and Coal Products Manufacturing, Screw, Nut Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Communications Equipment and Apparatus Manufacturing, Real Estate Investment, Wholesale.
　
● Manufacturers surveyed who felt the November outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Metal Dies, Motor Vehicles Manufacturing, Restaurants and Hotels.
　
● Manufacturers surveyed who felt the November 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, Electric Wires and Cables Manufacturing, Electrical Appliances and Housewares Manufacturing, Precision Instruments Manufacturing, Securities, Insurance.
　
● Manufacturers surveyed who felt the November 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, Paper Manufacturing, Petrochemicals Manufacturing, Plastics and Rubber Raw Materials, Chemical Products Manufacturing, Rubber Products Manufacturing, Plastic Products Manufacturing, Glass and Glass Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electronic Machinery, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Transport Equipment Manufacturing and Repairing, Education and Entertainment Articles Manufacturing, Construction, Retail Sales, Banks, Telecommunication Services, Transportation and Storage.
　
● Manufacturers' sentiments that have improved in the November survey and is expected to deteriorate over the next six months include:
Porcelain and Ceramic Products Manufacturing.
　
● Manufacturers' sentiments that have improved in the November survey and is expected to remain upbeat over the next six months include:
Cement and Cement Products Manufacturing, Motor Parts Manufacturing, Motorcycles Manufacturing, Bicycles Parts Manufacturing.
　
● Manufacturers' sentiments that have improved in the November 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 , Apparel, Clothing Accessories and Other Textile Product Manufacturing , Printing, Basic Civil Structure Construction.