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2018.10.25
The trade conflicts as the largest headwind hindering recovery
TIER composite indicators signal a likely ending of growing binge

The Taiwanese Economy in September 2018

The US economy is still among all the strongest with promising purchasing managers' indicators and sharply increased leading index. However, the escalated trade conflicts or ongoing tariff war between the US and China could still be the biggest uncertainty hindering the world economy. Worried about the potential impacts caused by said uncertainty, all three composite indicators issued by the Taiwan Institute of Economic Research (TIER) signal slowing growth in the near future.
Taiwan's exports in September 2018 increased by 2.61% compared with the same month of 2017. Regarding imports, Taiwan's imports in September 2018 increased by 13.89% compared with imports in August 2017. Exports and imports grew by 8.07% and 11.90% y-o-y respectively from January 1st till the end of September this year, Taiwan's exports and imports gave a trade surplus of US$ 36.69 billion or a decrease by 9.86% on a y-o-y basis for the first 9 months of this year.
Taiwan's consumer price index (CPI) grew by 1.72% in September 2018 compared with the same month of previous year. The core inflation rate excluding prices of the energy and food grew by 1.20% in September, 2018. In addition, the wholesale price index (WPI) moved up by 6.55% in September 2018 on the year-on-year basis. On the cumulative basis, the CPI went up by 1.66% and WPI went up by 3.85% from January 1st till September 30th 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 30.55 in late September 2018 indicating a 0.59% depreciation. Regarding the interest rate, it remained low and steady in September 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 September 2018 stood at 0.173% and 0.187% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 11.6% or decreased by 10.5 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 42.1% or increased by 20 percentage points than 22.1% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 46.3% or decreased by 9.5 percentage points compared with 55.8% 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 15.7% in the target month or increased by 0.7 percentage points than 15.0% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 32.0% or increased by 5.9 percentage points compared with 26.1% 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 52.3% or decreased by 6.6 percentage points compared with 58.9% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also somewhat pessimistic.
The manufacturing composite indicator for September, 2018 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 98.25 points in August moved down to 93.76 points in September. Figure 1 shows a decrease of 4.49 points, the second month of consecutive decline.
The TIER service sector composite indicator for September, 2018 adjusted for seasonal factors on moving average, also saw a downward correlation, and from a revision of as 98.0 points in August moved down to 95.62 points in September. Figure 1 shows a decrease of 2.38 points, also the second month of consecutive decline.
In addition, the TIER Construction Sector Composite Indicator for September, 2018 adjusted for seasonal factors on moving average, also saw a downward correction, and from a revision of 99.28 points in August went down to 96.53 points in September. Figure 1 shows a decrease of 2.75 points, the first decline after a three-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 September survey and are expected to deteriorate over the next six months include:
Industrial Chemicals, Plastics and Rubber Raw Materials, Plastic Products Manufacturing, Electrical Appliances and Housewares Manufacturing, Motorcycles Manufacturing, Securities.
 
● Manufacturers' sentiments that have been in decline in the September survey, but are expected to improve over the next six months include:
Insurance.
 
● Manufacturers' sentiments that have been in decline in the September survey and are expected to remain sluggish over the next six months include:
Slaughtering, Soft Drink Manufacturing , Paper Manufacturing, Porcelain and Ceramic Products Manufacturing, Glass and Glass Products Manufacturing, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electric Wires and Cables Manufacturing, Communications Equipment and Apparatus Manufacturing, Bicycles Parts Manufacturing, Restaurants and Hotels.
 
● 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:
Yarn Spinning Mills, Transport Equipment Manufacturing and Repairing, Motor Parts 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:
Leather, Fur and Allied Product Manufacturing, Wood and Bamboo Products Manufacturing, Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing, Precision Instruments Manufacturing, Education and Entertainment Articles Manufacturing, Transportation and Storage.
 
● 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, Food, Frozen Food Manufacturing, Textiles Mills, Fabric Mills , Apparel, Clothing Accessories and Other Textile Product Manufacturing , Man-made Fibers Manufacturing, Chemical Products Manufacturing, Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electronic Machinery, Bicycles Manufacturing, Retail Sales, Banks, Telecommunication Services.
 
● Manufacturers' sentiments that have improved in the September survey and is expected to deteriorate over the next six months include:
None.
 
● Manufacturers' sentiments that have improved in the September survey and is expected to remain upbeat over the next six months include:
Basic Civil Structure Construction.
 
● Manufacturers' sentiments that have improved in the September survey and the trend is expected to continue for the next six months include:
Edible Oil Manufacturing, Flour Milling and Grain Husking , Prepared Animal Feeds Manufacturing, Petrochemicals Manufacturing, Audio and Video Electronic Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Motor Vehicles Manufacturing, Construction, Real Estate Investment, Wholesale.

 

 

 
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