The Taiwanese Economy in August 2018

The broad-based strengthening of global growth was led by the US, whereas its economic grew by 2.9% in the second quarter of this year compared with the same period of last year. The European economy has also on the recovery track, but not as strong as the US economic rebound. External demand performances of East Asian economies seem very solid; no weakening signs triggered by the recent trade war between the US and China yet. However, two out of three composite indicators issued by the Taiwan Institute of Economic Research (TIER) signal slowing growth in the near future.
Taiwan's exports in August 2018 increased by 1.93% compared with the same month of 2017. Regarding imports, Taiwan's imports in August 2018 increased by 7.89% compared with imports in August 2017. Exports and imports grew by 8.86% and 11.65% y-o-y respectively from January 1st till the end of August this year, Taiwan's exports and imports gave a trade surplus of US$ 32.35 billion or a decrease by 4.97% on a y-o-y basis for the first 8 months of this year.
Taiwan's consumer price index (CPI) grew by 1.53% in August 2018 compared with the same month of previous year. The core inflation rate excluding prices of the energy and food grew by 1.36% in August, 2018. In addition, the wholesale price index (WPI) moved up by 6.83% in August 2018 on the year-on-year basis. On the cumulative basis, the CPI went up by 1.64% and WPI went up by 3.49% from January 1st till August 31st 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 30.73 in late August 2018 indicating a 0.38% depreciation. Regarding the interest rate, it remained low and steady in August 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 August 2018 stood at 0.176% and 0.181% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 21.8% or decreased by 3.2 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 22.7% or increased by 2.0 percentage points than 20.7% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 55.5% or increased by 1.2 percentage points compared with 54.3% 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 15.0% in the target month or decreased by 7.8 percentage points than 22.8% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 26.3% or increased by 9.9 percentage points compared with 16.4% 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 58.7% or decreased by 2.0 percentage points compared with 60.7% 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 August, 2018 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 101.46 points in July moved down to 98.16 points in August. Figure 1 shows a decrease of 3.30 points, the first decline after an increase.
The TIER service sector composite indicator for August, 2018 adjusted for seasonal factors on moving average, also saw a downward correlation, and from a revision of as 100.08 points in July moved down to 96.39 points in August. Figure 1 shows a decrease of 3.69 points, the first decline after an increase as well.
In addition, the TIER Construction Sector Composite Indicator for the first decline after an increase 2017 adjusted for seasonal factors on moving average nevertheless saw an upward correction, and from a revision of 98.51 points in July went up to 99.47 points in August. Figure 1 shows an increase of 0.96 points, 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 August survey and are expected to deteriorate over the next six months include:
Leather, Fur and Allied Product Manufacturing, Motorcycles Manufacturing.
　
● Manufacturers' sentiments that have been in decline in the August survey, but are expected to improve over the next six months include:
Motor Parts Manufacturing, Basic Civil Structure Construction.
　
● Manufacturers' sentiments that have been in decline in the August survey and are expected to remain sluggish over the next six months include:
Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Real Estate Investment, Securities.
　
● Manufacturers surveyed who felt the August outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Yarn Spinning Mills, Plastics and Rubber Raw Materials, Plastic Products Manufacturing.
　
● Manufacturers surveyed who felt the August outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing, Restaurants and Hotels.
　
● Manufacturers surveyed who felt the August outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Slaughtering, Prepared Animal Feeds Manufacturing, Textiles Mills, Fabric Mills , Apparel, Clothing Accessories and Other Textile Product Manufacturing , Wood and Bamboo Products Manufacturing, Industrial Chemicals, Man-made Fibers Manufacturing, Chemical Products Manufacturing, Rubber Products Manufacturing, Glass and Glass Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electrical Appliances and Housewares Manufacturing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Motorcycles Parts Manufacturing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Construction, Retail Sales, Banks, Insurance, Telecommunication Services, Transportation and Storage.
　
● Manufacturers' sentiments that have improved in the August survey and is expected to deteriorate over the next six months include:
None.
　
● Manufacturers' sentiments that have improved in the August survey and is expected to remain upbeat over the next six months include:
Paper Manufacturing, Electronic Parts and Components Manufacturing, Precision Instruments Manufacturing, Education and Entertainment Articles Manufacturing.
　
● Manufacturers' sentiments that have improved in the August survey and the trend is expected to continue for the next six months include:
Food, Frozen Food Manufacturing, Edible Oil Manufacturing, Flour Milling and Grain Husking , Soft Drink Manufacturing , Petrochemicals Manufacturing, Petroleum and Coal Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Electric Wires and Cables Manufacturing, Audio and Video Electronic Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Wholesale.