The Taiwanese Economy in March 2018

Contributed by the positive recovery of US economy and European Union, the global economic outlook remains optimistic; however, the outlook can be offset by potential uncertainties such as the trade conflict between Washington and Beijing. Despite of all that, Taiwan's Q1 performance in its external market was surprisingly better than expected thanks to strong world demands in new technology and machinery equipment. As a result, the Taiwan Institute of Economic Research (TIER) adjusts its annual GDP forecast upward. Taiwan's GDP is predicted to grow by 2.45% this year. It would be 0.11 percentage points higher than TIER's previous forecast.
Taiwan's exports in March 2018 increased significantly by 16.72% compared with the same month of 2017. Regarding imports, Taiwan's imports in March 2018 increased by 10.44% compared with imports in March 2017. Exports and imports grew by 10.62% and 11.0% y-o-y respectively from January 1st till the end of March this year, Taiwan's exports and imports gave a trade surplus of US$ 1.18 billion or an increase by 8.51% on a y-o-y basis during the entire year.
Taiwan's consumer price index (CPI) went up by 1.57% in March 2018 compared with the same month of previous year. The core inflation rate stood at 1.53% in March, 2018. In addition, the wholesale price index (WPI) moved up by 0.46% in March 2018 on the year-on-year basis. On the cumulative basis, the CPI went up by 1.54% and WPI went down 0.17% for the first quarter of 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 had sent out its certain hawkish messages and hot money continued to flow out. Anyway, the NTD/USD stood at 29.12 in late March 2018 indicating only a mild 0.38% appreciation. Regarding the interest rate, it remained low and steady in March 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 March 2018 stood at 0.177% and 0.184% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 49.7% or increased by 35.0 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 10.1% or decreased by 31.4 percentage points than 41.5% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 40.2% or decreased by 3.7 percentage points compared with 43.9% 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 29.8% in the target month or decreased by 19.9 percentage points than 49.7% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 7.1% or decreased by 1.4 percentage points compared with 8.5% 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 63.1% or increased by 21.2 percentage points compared with 41.9% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also quite neutral.
The manufacturing composite indicator for March, 2018 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 98.24 points in February moved up to 100.05 points in March. Figure 1 shows an increase of 1.81 points.
The TIER service sector composite indicator for March, 2018 adjusted for seasonal factors on moving average, also saw an upward correlation, and from a revision of as 93.16 points in February moved up to 94.39 points in March. Figure 1 shows an increase of 1.23 points.
In addition, the TIER Construction Sector Composite Indicator for March 2017 adjusted for seasonal factors on moving average also saw a downward correction, and from a revision of 101.82 points in February went down to 98.09 points in March. Figure 1 shows an decrease of 3.73 points, a second 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 March survey and are expected to deteriorate over the next six months include:
None.
　
● Manufacturers' sentiments that have been in decline in the March survey, but are expected to improve over the next six months include:
Electrical Appliances and Housewares Manufacturing.
　
● Manufacturers' sentiments that have been in decline in the March survey and are expected to remain sluggish over the next six months include:
Slaughtering, Prepared Animal Feeds Manufacturing.
　
● Manufacturers surveyed who felt the March outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Yarn Spinning Mills, Restaurants and Hotels.
　
● Manufacturers surveyed who felt the March outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Communications Equipment and Apparatus Manufacturing, Precision Instruments Manufacturing.
　
● Manufacturers surveyed who felt the March outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Food, Edible Oil Manufacturing, Flour Milling and Grain Husking , Leather, Fur and Allied Product Manufacturing, Petroleum and Coal Products Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electronic Machinery, Retail Sales, Telecommunication Services, Transportation and Storage.
　
● Manufacturers' sentiments that have improved in the March survey and is expected to deteriorate over the next six months include:
Plastic Products Manufacturing.
　
● Manufacturers' sentiments that have improved in the March survey and is expected to remain upbeat over the next six months include:
Fabric Mills , Wood and Bamboo Products Manufacturing, Paper Manufacturing, Printing, Plastics and Rubber Raw Materials, Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Electric Wires and Cables Manufacturing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Education and Entertainment Articles Manufacturing, Basic Civil Structure Construction.
　
● Manufacturers' sentiments that have improved in the March survey and the trend is expected to continue for the next six months include:
Frozen Food Manufacturing, Soft Drink Manufacturing , Textiles Mills, Apparel, Clothing Accessories and Other Textile Product Manufacturing , Industrial Chemicals, Petrochemicals 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, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Metal Structure and Architectural Components Manufacturing, Audio and Video Electronic Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Motor Parts Manufacturing, Motorcycles Manufacturing, Motorcycles Parts Manufacturing, Construction, Real Estate Investment, Wholesale, Banks, Securities, Insurance.