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2020.1.22
The global economic recovery in 2020 seems positive
TIER composite indicators signaled more optimism

The Taiwanese Economy in December 2019

Most international forecasting agencies issued their forecasts in economic growth of 2020, which outperform the growth of 2019 with respect to the recent truce between the US and China; a phase-one deal was signed on January 15, 2020. Accordingly, all three composite indicators issued by the Taiwan Institute Economic Research (TIER) increased signaling more optimism.
Taiwan's exports in December 2019 increased by 3.97% compared with the same month of 2018. The exports to the US market increased by significantly 12.9% y-o-y, whereas exports to China increased by 6.2% y-o-y in December 2019. Regarding imports, Taiwan's imports in December 2019 increased by 13.91% compared with imports in December of 2018. On the cumulated basis, exports and imports from January till the end of December this year gave a trade surplus of US$ 43.48 billion that's US$ 5.73 billion less than the trade surplus in 2018.
Taiwan's consumer price index (CPI) increased by only 1.13% in December 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 of 2018 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 0.50% in December 2019. In addition, the wholesale price index (WPI) moved down by 3.42% in December 2019 on the year-on-year basis due to the fact that commodity prices dropped continuously.
As for exchange rate, the NTD similar to all other major currencies in the world went somewhat stronger due to the relatively weaker USD. The NTD/USD stood at 30.106 in late December 2019 indicating a 1.33% appreciation. Regarding the interest rate, it remained low and steady in December 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 December 2019 stood at 0.168% and 0.183% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 25.2% or increased by 7.3 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 21.3% or decreased by 9.1 percentage points than 30.4% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 53.4% or increased by 1.7 percentage points compared with 51.7% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was more optimistic than the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 34.9% in the target month or increased by 10 percentage points than 24.9% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 15.4% or decreased by 2.7 percentage points compared with 18.1% 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 49.7% or decreased by 7.3 percentage points compared with 57.0% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also more optimistic compared with the previous month.
The manufacturing composite indicator for December 2019 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 93.27 points in November 2019 moved up to 96.87 points. Figure 1 shows an increase of 3.60 points, the increase of second month in a row.
The TIER service sector composite indicator for December 2019 adjusted for seasonal factors on moving average saw an upward correlation, and from a revision of as 87.66 points in November 2019 moved up to 92.96 points. Figure 1 shows an increase of 5.3 points, the first increase after 4-month decrease in a row.
In addition, the TIER Construction Sector Composite Indicator for December 2019 adjusted for seasonal factors on moving average, also saw an upward correction, and from a revision of 101.53 points in November 2019 went up to 102.59 points. Figure 1 shows an increase of 1.06 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 December survey and are expected to deteriorate over the next six months include:
Wood and Bamboo Products Manufacturing, Motorcycles Parts Manufacturing, Restaurants and Hotels.
 
● Manufacturers' sentiments that have been in decline in the December survey, but are expected to improve over the next six months include:
Audio and Video Electronic Products Manufacturing.
 
● Manufacturers' sentiments that have been in decline in the December survey and are expected to remain sluggish over the next six months include:
Leather, Fur and Allied Product Manufacturing, Man-made Fibers Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Motorcycles Manufacturing.
 
● Manufacturers surveyed who felt the December outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Textiles Mills, Yarn Spinning Mills, Telecommunication Services.
 
● Manufacturers surveyed who felt the December outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Fabric Mills , Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing, Electronic Machinery, Electronic Parts and Components Manufacturing, Bicycles Manufacturing, Precision Instruments Manufacturing, Banks, Insurance.
 
● Manufacturers surveyed who felt the December outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Frozen Food Manufacturing, Prepared Animal Feeds Manufacturing, Printing, Industrial Chemicals, Plastics and Rubber Raw Materials, Chemical Products Manufacturing, Plastic Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Iron and Steel Basic Industries, Screw, Nut Manufacturing, Industrial Machinery, Communications Equipment and Apparatus Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Transport Equipment Manufacturing and Repairing, Motor Parts Manufacturing, Education and Entertainment Articles Manufacturing, Construction, Wholesale, Transportation and Storage.
 
● Manufacturers' sentiments that have improved in the December survey and is expected to deteriorate over the next six months include:
Petrochemicals Manufacturing, Motor Vehicles Manufacturing.
 
● Manufacturers' sentiments that have improved in the December survey and is expected to remain upbeat over the next six months include:
Paper Manufacturing, Bicycles Parts Manufacturing, Securities.
 
● Manufacturers' sentiments that have improved in the December survey and the trend is expected to continue for the next six months include:
Food, Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain Husking , Soft Drink Manufacturing , Apparel, Clothing Accessories and Other Textile Product Manufacturing , Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing, Glass and Glass Products Manufacturing, Fabricated Metal Products Manufacturing, Metal Dies, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electric Wires and Cables Manufacturing, Electrical Appliances and Housewares Manufacturing, Basic Civil Structure Construction, Real Estate Investment, Retail Sales.

TIER Forecast (issued on 22nd January, 2020.)
(NT$100 million, Chained (2011) Dollars)

 

 
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