The Taiwanese Economy in September 2022

Looking at the recent international economic situation, all international agencies including the International Monetary Fund (IMF), OECD, IHS Markit, and EIU have lowered their economic forecasts for the world and major economies. For example, according to the estimated data released by the IMF in October 2022, the global economic growth rate will drop from 6% in 2021 to 3.2% in 2022, and stand at only 2.7% in 2023. The IMF said that global economic activity is experiencing a wide-ranging and unexpected slowdown. High inflation has not only made people's living costs soar, but also led most countries to adopt tighter monetary policies to combat inflation. The possibility of escalation, the global economic outlook has turned bleak, and the slowdown will continue into 2023. In terms of domestic manufacturing, end demand continues to weaken, and traditional manufacturers continue to be pessimistic. In addition, due to weaker demand for consumer electronic products, the adjustment period of customer inventory continues to lengthen, and the impact of the US-China technology war is expanding. The Taiwan Institute of Economic Research (TIER) issued monthly composite indicators in October 2022; all three indicators including manufacturing, service, and construction sector composite indicators decline consecutively.
Taiwan’s economic performance in external markets has been slowing down, and the export orders have been weakening. Taiwan’s exports in September 2022 decreased by only 5.29% compared with the same month of 2021. Regarding imports, Taiwan’s imports in September 2022 decreased by 2.37% compared with imports in September of 2021. Taiwan’s exports and imports from January till the end of September 2022 gave a trade surplus as at US$ 40.68 billion or decrease by 13.29% year-on-year due to more costly in imports of commodities and slowing growth in exports compared with those in 2021.
Taiwan’s consumer price index (CPI) increased by 2.75% in September 2022 compared with the same month of previous year, which would be 0.09 percentage points higher than the inflation rate of previous month. The core inflation rate excluding prices of the energy and food increased by 2.79% in September 2022, which would be 0.05 percentage points higher than the core inflation rate in August 2022. In addition, the wholesale price index (WPI) increased by 12.82% in September 2022 on the year-on-year basis, the consecutive eighteenth-month in double digit growth. The pressure of surging input costs is still quite serious compared with the previous month. Therefore, some producers are transferring the costs to consumers to break even.
As for exchange rate, the NTD went weaker due to the relative trend of USD exchange rate in September 2022. As the US Federal Reserve’s upcoming policy is relatively more hawkish in order to cope with the inflation. The NTD/USD stood at 31.743 in late September 2022, indicating a 4.30% depreciation. The Taiwan central bank (CBC) raised its key interest rates by 0.125 percentage points on 23rd September 2022. The attention is on CBC’s next meeting in December. Regarding the over-night call rate; the lowest and highest rate in September 2022 stood at 0.305% and 0.444% respectively.

Business Survey Outcomes

The portion of manufacturing firms who perceived business were better than expected in the target month was 15.8% or decreased by 1.6 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 43.8% or increased by 0.5 percentage points as respondents perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 40.4% or increased by 1.1 percentage points than the ratio of previous month’s respondents perceiving constant business. Overall, manufacturing firms perceived the business in the target month was somewhat pessimistic about the business conditions compared with the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 12.1% in the target month or decreased by 3.1 percentage points than 15.2% of respondents feeling more optimistic about the near future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 43.0% or increased by 2.1 percentage points compared with 40.9% of respondents feeling rather pessimistic about the near future in the previous month. The portion of manufacturing firms who perceived business remained constant in the next six months stood at 44.9% or increased by 1.0 percentage points compared with 43.9% of respondents feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was as a result still pessimistic compared with the previous month.
As a result, the manufacturing composite indicator for September 2022 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 86.13 points in August moved down to 85.04 points in September 2022. Figure 1 shows a decrease of 1.09 points, a nine-month of consecutive decrease.
Moreover, the TIER service sector composite indicator for September 2022 on moving average also saw a downward correlation, and from a revision of as 96.05 points in August moved down to 94.02 points in September 2022. Figure 1 shows a decrease of 2.03 points, the second month of consecutive dip.
Last but not the least, the TIER construction sector composite Indicator for September 2022 adjusted for the seasonal factors on moving average saw a downward correlation as well, and from a revision of 93.27 points in August went down to 90.72 points in September 2022. Figure 1 shows a decrease of 2.55 points, the second month of consecutive dip, too.

Analyses and Outlook of Industries

Following are manufacturers' sentiments that are industry-specific in the monthly TIER surveys:

● Manufacturers’ sentiments that have been in decline in the September survey and are expected to deteriorate over the next six months include:
Textiles Mills, Yarn Spinning Mills, Fabric Mills, Electrical Appliances and Housewares Manufacturing, Electronic Machinery, Electronic Parts and Components Manufacturing, Real Estate Investment, Securities, Insurance.

● Manufacturers’ sentiments that have been in decline in the September survey, but are expected to improve over the next six months include:
None.

● Manufacturers’ sentiments that have been in decline in the September survey and are expected to remain sluggish over the next six months include:
Food, Frozen Food Manufacturing, Soft Drink Manufacturing, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Paper Manufacturing, Petroleum and Coal Products Manufacturing, Plastic Products Manufacturing, Iron and Steel Basic Industries, Motor Vehicles Manufacturing, Motorcycles Manufacturing, Construction, Basic Civil Structure Construction.

● Manufacturers surveyed who felt the September outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Manufacturing, Industrial Chemicals, Petrochemicals Manufacturing, Man-made Fibers Manufacturing, Glass and Glass Products Manufacturing, Audio and Video Electronic Products Manufacturing.

● Manufacturers surveyed who felt the September outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Edible Oil Manufacturing, Flour Milling and Grain Husking, Retail Sales.

● Manufacturers surveyed who felt the September outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Slaughtering, Prepared Animal Feeds Manufacturing, Wood and Bamboo Products Manufacturing, Plastics and Rubber Raw Materials, Chemical Products Manufacturing, Rubber Products Manufacturing, Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Cement and Cement Products Manufacturing, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electric Wires and Cables Manufacturing, Transport Equipment Manufacturing and Repairing, Motorcycles Parts Manufacturing, Education and Entertainment Articles Manufacturing, Transportation and Storage.

● Manufacturers’ sentiments that have improved in the September survey and is expected to deteriorate over the next six months include:
Leather, Fur and Allied Product Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Data Storage Media Units Manufacturing and Reproducing, Wholesale.

● Manufacturers’ sentiments that have improved in the September survey and is expected to remain upbeat over the next six months include:
Printing, Electrical Machinery, Supplies Manufacturing and Repairing, Communications Equipment and Apparatus Manufacturing, Motor Parts Manufacturing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Precision Instruments Manufacturing, Restaurants and Hotels, Banks, Telecommunication Services.

● Manufacturers’ sentiments that have improved in the September survey and the trend is expected to continue for the next six months include:
None.