The Taiwanese Economy in October 2019

Slowing investment has hindered the economic recovery of major economies including the US, Europe, and China. As the year-end APEC meeting is cancelled, the US and China need to locate an alternative venue to sign the phase one trade deal. However, the Hong Kong issue has further complicated the decisions and decision-making processes of Washington DC and Beijing. Since uncertainties betide, the composite indicators issued by the Taiwan Institute Economic Research (TIER) offer both positive and negative signals. The construction composite indicator increased, whereas the service and manufacturing indicator declined in October 2019.
Taiwan's exports in October 2019 decreased by 1.47% compared with the same month of 2018, not as much as the previous decreasing ratio. The exports to the US market increased by significantly 17.9% y-o-y, whereas exports to China decreased by 3.1% y-o-y in October 2019. Regarding imports, Taiwan's imports in October 2019 decreased by 4.06% compared with imports in October of 2018. On the cumulated basis, exports and imports from January till the end of October this year gave a trade surplus of US$ 36.71 billion or decreased by 7.85% on a y-o-y basis.
Taiwan's consumer price index (CPI) increased by only 0.39% in October 2019 compared with the same month of previous year due to the supply of vegetables and fruits was somewhat impacted by severe weather in October causing higher prices of fruits and vegetables; 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 0.66% in October 2019. In addition, the wholesale price index (WPI) moved down by 6.21% in October 2019 on the year-on-year basis due to the fact that commodity and crude oil prices dropped significantly.
As for exchange rate, the NTD similar to all other major currencies in the world went somewhat stronger due to the relatively weaker USD with respect to the Fed's 3-time recalibration measures this year. The NTD/USD stood at 30.462 in late October 2019 indicating a 1.87% appreciation. Regarding the interest rate, it remained low and steady in October 2019 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 October 2019 stood at 0.169% and 0.177% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 21.9% or increased by 2.9 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 34.8% or decreased by 3.3 percentage points than 38.1% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 43.3% or increased by 0.4 percentage points compared with 42.9% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was somewhat a little bit more optimistic than the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 18.3% in the target month or increased by 2.3 percentage points than 16.0% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 28.5% or increased by 7.5 percentage points compared with 21.0% 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 53.2% or decreased by 9.8 percentage points compared with 63.0% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was somewhat pessimistic compared with the previous month.
The manufacturing composite indicator for October 2019 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 94.59 points in September 2019 moved down to 92.37 points. Figure 1 shows a decrease of 2.22 points, the second month of decrease in a row.
The TIER service sector composite indicator for October 2019 adjusted for seasonal factors on moving average also saw a downward correlation, and from a revision of as 89.11 points in September 2019 moved down to 89.04 points. Figure 1 shows a mild decrease of 0.07 points.
In addition, the TIER Construction Sector Composite Indicator for October 2019 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of 97.94 points in September 2019 went up to 103.01 points. Figure 1 shows a strong increase of 5.07 points, the first mount after a dip in previous month.

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