The Taiwanese Economy in June 2017

The US Bureau of Economic Analysis (BEA) adjusted its Q1 estimate of the US GDP growth upward by 0.1 percentage points the second time. The Chinese economy has again exceeded the market expectation with a significant growth of 6.9% for the first half of 2017. With that growth ratio, there's neither hard landing nor soft landing for the time being. In addition, the Bank of Japan further adjusts its forecast for this year's Japan economy upward. In conclusion, the global recovery has offered further optimistic outlook. Accordingly, the Taiwan Institute of Economic Research (TIER) adjusts its outlook for Taiwan's economy; Taiwan's GDP is predicted to grow by 2.08% this year.
Taiwan's exports in June 2017 increased by 12.97% compared with the same month of 2016; that grew by 8.43% in May y-o-y. Regarding imports, Taiwan's imports in June 2017 increased by 3.7% compared with imports in June 2016, whereas that grew by 10.2% y-o-y. From January 1st till the end of June this year, Taiwan's exports and imports gave a trade surplus of US$ 22.84 billion or a decrease by 5.28% on a y-o-y basis.
Taiwan's consumer price index (CPI) went up by 1.0% in June 2017 compared with the same month of previous year. The current inflation rate has gradually moved back up compared with previous months. The core inflation rate stood at a relatively more tepid ratio as only 0.97% in June, 2017. In addition, the wholesale price index (WPI) decreased by 1.68% in June 2017 on the year-on-year basis.
As for exchange rate, the NTD went somewhat weaker due to the relatively stronger USD. The USD/NTD stood at 30.436 in late June 2017 indicating a 1.11% depreciation. However, the attention must be paid to the Fed's future rate hike in addition to its intention to unwind the US$ 4.5 trillion balance sheet. Regarding the interest rate, it remained low and steady in June 2017 due to the continued loose monetary operations by the CBC with respect to the most recent CPI reading.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 33.3% or increased by 6.2% 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 24.8% or decreased by 0.9 percentage points than 25.7% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 41.9% or decreased by 5.3 percentage points compared with 47.2% 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 35.3% in the target month or increased by 0.5 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 19.1% or decreased by 0.2 percentage points compared with 19.3% 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 45.6% or decreased by 0.2 percentage points compared with 45.8% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was neutral to somewhat optimistic.
The manufacturing composite indicator for June, 2017 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 95.47 points in May moved up to 96.49 points in June that would be the first increase after a 5-month consecutive decline. Figure 1 shows an increase of 1.02 points.
The TIER service sector composite indicator for June 2017 adjusted for seasonal factors on moving average, saw an upward correlation, and from a revision of as 92.92 points in May moved up to 95.39 points in June that would be a 4-month consecutive increase. Figure 1 shows an increase of 0.47 points.
In addition, the TIER Construction Sector Composite Indicator for June 2017 adjusted for seasonal factors on moving average also saw an upward correction, and from a revision of 87.94 points in May went up to 90.32 points in June. Figure 1 shows an increase of 2.38 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 June survey and are expected to deteriorate over the next six months include:
Petroleum and Coal Products Manufacturing.

● Manufacturers' sentiments that have been in decline in the June survey, but are expected to improve over the next six months include:
Cement and Cement Products Manufacturing.

● Manufacturers' sentiments that have been in decline in the June survey and are expected to remain sluggish over the next six months include:
Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain Husking , Prepared Animal Feeds Manufacturing, Motorcycles Parts Manufacturing, Restaurants and hotels.

● Manufacturers surveyed who felt the June outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Plastic Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Bicycles Manufacturing.

● Manufacturers surveyed who felt the June outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Soft Drink Manufacturing , Petrochemicals Manufacturing, Non-metallic Mineral Products Manufacturing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Motor Parts Manufacturing, Education and Entertainment Articles Manufacturing.

● Manufacturers surveyed who felt the June 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, 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, Chemical Products Manufacturing, Rubber Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal dies, Screw, Nut Manufacturing, Metal Structure and Architectural Components Manufacturing, Audio and Video Electronic Products Manufacturing, Retail sales, Telecommunication services.

● Manufacturers' sentiments that have improved in the June survey and is expected to deteriorate over the next six months include:
None.

● Manufacturers' sentiments that have improved in the June survey and is expected to remain upbeat over the next six months include:
Paper Manufacturing, Glass and Glass Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and tools Manufacturing, Industrial Machinery, Electric Wires and Cables Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Motor Vehicles Manufacturing, Motorcycles Manufacturing, Bicycles Parts Manufacturing, Precision Instruments Manufacturing, Banks, Securities, Insurance, Transportation and storage.

● Manufacturers' sentiments that have improved in the June survey and the trend is expected to continue for the next six months include:
Printing, Plastics and rubber raw materials, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electrical Appliances and Housewares Manufacturing, Transport Equipment Manufacturing and Repairing, Construction, Basic civil structure construction, Real estate investment, Wholesale.

TIER Forecast (issued on 25th July, 2017.)
(NT$100 million, Chained (2011) Dollars)