The Taiwanese Economy in November 2018

The US economy is probably the only economy in the world that has continued its expansion mold. As a result, the Federal Reserve (Fed) decided to hike the federal funds rate to 2.25-2.5%, although president Trump did not appreciate the tightening measure at all. Given weakening demand externally, the service and manufacturing composite indicators issued by the Taiwan Institute of Economic Research (TIER) decline for the fourth consecutive month.
Taiwan's exports in November 2018 decreased by 3.43% compared with the same month of 2017. Regarding imports, Taiwan's imports in November 2018 increased by 1.06% compared with imports in November 2017. Exports and imports grew by 6.8% and 11.4% y-o-y respectively from January 1st till the end of November this year, Taiwan's exports and imports gave a trade surplus of US$ 44.68 billion or a decrease by 13.82% on a y-o-y basis for the first 11 months of this year.
Taiwan's consumer price index (CPI) grew by 0.31% in November 2018 compared with the same month of previous year. The core inflation rate excluding prices of the energy and food grew by 0.67% in November, 2018. In addition, the wholesale price index (WPI) moved up by 3.25% in November 2018 on the year-on-year basis. On the cumulative basis, the CPI went up by 1.48% and WPI went up by 3.93% from January 1st till November 30th 2018 compared with the same period last year.
As for exchange rate, the NTD similar to all other major currencies in the world went somewhat stronger due to the relatively weaker USD, as the Fed is likely to turn more dovish in the future. Anyway, the NTD/USD stood at 30.85 in late November 2018 indicating a 0.38% appreciation. Regarding the interest rate, it remained low and steady in November 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 November 2018 stood at 0.173% and 0.179% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 10.3% or decreased by 10.8 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 47.0% or increased by 9.9 percentage points than 37.1% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 42.7% or increased by 0.9 percentage points compared with 41.8% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was pessimistic.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 16.5% in the target month or increased by 9.5 percentage points than 7.0% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 24.1% or decreased by 15.1 percentage points compared with 39.6% 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 59.4% or increased by 6.0 percentage points compared with 53.4% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was somewhat optimistic than the previous month.
The manufacturing composite indicator for November, 2018 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 88.45 points in October moved down to 86.01 points in November. Figure 1 shows a decrease of 2.44 points, the fourth month of consecutive decline.
The TIER service sector composite indicator for November, 2018 adjusted for seasonal factors on moving average, also saw a downward correlation, and from a revision of as 92.19 points in October moved down to 90.66 points in November. Figure 1 shows a decrease of 1.53 points, also the fourth month of consecutive decline.
In addition, the TIER Construction Sector Composite Indicator for November, 2018 adjusted for seasonal factors on moving average, saw a downward correction as well, and from a revision of 97.19 points in October went down to 92.94 points in November. Figure 1 shows a decrease of 4.25 points, the first dip after a one-month increase.

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:
Man-made Fibers Manufacturing, Electrical Machinery, Supplies Manufacturing and Repairing, Electric Wires and Cables Manufacturing, Electronic Machinery, Motorcycles Parts Manufacturing, Construction, Basic Civil Structure Construction.
　
● Manufacturers' sentiments that have been in decline in the November survey, but are expected to improve over the next six months include:
None.
　
● Manufacturers' sentiments that have been in decline in the November survey and are expected to remain sluggish over the next six months include:
Communications Equipment and Apparatus Manufacturing, Audio and Video Electronic Products Manufacturing.
　
● 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:
Industrial Chemicals, Petrochemicals Manufacturing, Plastics and Rubber Raw Materials, Fabricated Metal Products Manufacturing, Metal Dies, Electrical Appliances and Housewares Manufacturing, Motor Parts Manufacturing, Securities, Insurance, Telecommunication Services, Transportation and Storage.
　
● 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:
Motorcycles Manufacturing.
　
● 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, Food, Slaughtering, Soft Drink Manufacturing , Prepared Animal Feeds Manufacturing, Textiles Mills, Yarn Spinning Mills, Fabric Mills , Apparel, Clothing Accessories and Other Textile Product Manufacturing , Leather, Fur and Allied Product Manufacturing, Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing, Plastic Products Manufacturing, Non-metallic Mineral Products Manufacturing, Iron and Steel Basic Industries, Screw, Nut Manufacturing, Metal Structure and Architectural Components Manufacturing, Machinery and Equipment Manufacturing and Repairing, Industrial Machinery, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Transport Equipment Manufacturing and Repairing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Precision Instruments Manufacturing, Education and Entertainment Articles Manufacturing, Real Estate Investment, Retail Sales, Wholesale, Restaurants and Hotels, Banks.
　
● Manufacturers' sentiments that have improved in the November survey and is expected to deteriorate over the next six months include:
Motor Vehicles Manufacturing.
　
● Manufacturers' sentiments that have improved in the November survey and is expected to remain upbeat over the next six months include:
Wood and Bamboo Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Glass and Glass Products Manufacturing, Cutlery and Tools Manufacturing.
　
● Manufacturers' sentiments that have improved in the November survey and the trend is expected to continue for the next six months include:
Frozen Food Manufacturing, Edible Oil Manufacturing, Flour Milling and Grain Husking , Paper Manufacturing, Chemical Products Manufacturing, Cement and Cement Products Manufacturing, Electrical Machinery.