The Taiwanese Economy in June 2018

The US economic performance remains strong and solid, despite that other major economies including the European Union, China, and Japan are slowing down in growth. The trade conflicts between the US and China seem escalated causing further uncertainties for the outlook of second half of 2018; however, the first half of Taiwan's economic growth was better than expected. The Taiwan Institute of Economic Research (TIER) adjusts its earlier forecast for Taiwan's real GDP growth rate in 2018 upward by 0.04 percentage points to 2.49%.
Taiwan's exports in June 2018 increased by 9.42% compared with the same month of 2017. Regarding imports, Taiwan's imports in June 2018 increased by 15.42% compared with imports in June 2017. Exports and imports grew by 10.92% and 10.82% y-o-y respectively from January 1st till the end of June this year, Taiwan's exports and imports gave a trade surplus of US$ 25.55 billion or an increase by 11.50% on a y-o-y basis for the first half of this year.
Taiwan's consumer price index (CPI) stood at 1.31% in June 2018 compared with the same month of previous year. The core inflation rate excluding prices of the energy and food stood at 1.30% in June, 2018. In addition, the wholesale price index (WPI) moved up by 6.65% in June 2018 on the year-on-year basis. On the cumulative basis, the CPI went up by 1.60% and WPI went up by 2.37% from January 1st till June 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 30.50 in late June 2018 indicating a 1.73% depreciation. Regarding the interest rate, it remained low and steady in June 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 June 2018 stood at 0.188% and 0.197% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 27.9% or decreased by 8.3 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 22.6% or increased by 9.9 percentage points than 12.7% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 49.5% or decreased by 1.6 percentage points compared with 51.1% 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 26.4% in the target month or decreased by 4.5 percentage points than 30.9% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 15.9% or increased by 4.8 percentage points compared with 11.1% 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 57.7% or decreased by 0.4 percentage points compared with 58.1% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was somewhat pessimistic to neutral.
The manufacturing composite indicator for June, 2018 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 101.47 points in May moved down to 100.52 points in June Figure 1 shows a decrease of 0.95 points, the first decline after an increase.
The TIER service sector composite indicator for June, 2018 adjusted for seasonal factors on moving average, also however saw a downward correlation, and from a revision of as 97.96 points in May moved down to 94.88 points in June. Figure 1 shows a decrease of 3.08 points, the first drop after a three-month consecutive increase.
In addition, the TIER Construction Sector Composite Indicator for June 2017 adjusted for seasonal factors on moving average nevertheless saw an upward correction, and from a revision of 94.0 points in May went up to 97.95 points in June. Figure 1 shows an increase of 3.95 points, the first increase after a four-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 June survey and are expected to deteriorate over the next six months include:
Plastic Products Manufacturing, Motorcycles Parts Manufacturing, Real Estate Investment, Telecommunication Services.
　
● 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, Electrical Machinery.
　
● Manufacturers' sentiments that have been in decline in the June survey and are expected to remain sluggish over the next six months include:
Leather, Fur and Allied Product Manufacturing, Plastics and Rubber Raw Materials, Fabricated Metal Products Manufacturing, Metal Structure and Architectural Components Manufacturing, Electrical Appliances and Housewares Manufacturing, Motor Parts Manufacturing, Motorcycles Manufacturing, Securities.
　
● 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:
None.
　
● 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:
Industrial Chemicals, Petrochemicals Manufacturing, Non-metallic Mineral Products Manufacturing, Electrical Machinery, Supplies Manufacturing and Repairing, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Bicycles 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, Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain Husking , Soft Drink Manufacturing , Prepared Animal Feeds Manufacturing, Textiles Mills, Yarn Spinning Mills, Fabric Mills , Wood and Bamboo Products Manufacturing, Man-made Fibers Manufacturing, Chemical Products Manufacturing, Rubber Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Glass and Glass Products Manufacturing, Iron and Steel Basic Industries, Metal Dies, Screw, Nut Manufacturing, Electric Wires and Cables Manufacturing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Audio and Video Electronic Products Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Bicycles Manufacturing, Construction, Basic Civil Structure Construction, Retail Sales, Wholesale, Transportation and Storage.
　
● 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, Precision Instruments Manufacturing, Banks, Insurance.
　
● Manufacturers' sentiments that have improved in the June survey and the trend is expected to continue for the next six months include:
Food, Frozen Food Manufacturing, Apparel, Clothing Accessories and Other Textile Product Manufacturing , Petroleum and Coal Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Restaurants and Hotels.

　TIER Forecast (issued on 25th July, 2018.)
(NT$100 million, Chained (2011) Dollars)