The Taiwanese Economy in April 2023

The US debt ceiling negotiations are still ongoing. Although the risk of U.S. government debt default is low, it will still cause increased turmoil in global financial markets. In addition, although China’s exports, total retail sales of consumer goods, and industrial added value in April still showed good performance in positive growth, China’s imports, real estate market, youth unemployment rate, new bank loans, and price data were not as expected; showing that China’s economic recovery is still unbalanced. In terms of domestic manufacturing, due to weakening terminal demand, China’s post-pandemic demand has been not as good as expected, and manufacturers continue to destock; therefore, Taiwan’s export and export orders and production performance in April were still weak. Taiwan’s service industry on the other hand has benefited from the lifting of mask order, and the return of consumers has made retailers rather optimistic about the economic performance of the month. However, due to the challenge of US regional banks facing the loss of deposits and shrinking asset values, and the US Treasury Secretary’s warning on the debt ceiling issue, the financial market was turbulent, and Taiwan’s financial-related businesses were pessimistic about the economic performance of the month as a result. Regarding Taiwan’s construction industry, the construction industry is optimistic about the economic performance in the next six months, because the Taiwan government has expanded its construction efforts. Based on the results of the survey, the business composite indicator for the manufacturing and service industries issued by the Taiwan Institute of Economic Research (TIER) declined in April 2023.
In terms of foreign trade, due to the still weak global economic demand, Taiwan’s exports in April 2023 decreased by 13.28% compared with the same month of 2022, the consecutive eight-month decrease. Regarding imports, Taiwan’s imports in April 2023 decreased by 20.20% compared with imports in April of 2022. Taiwan’s exports and imports from the beginning of this year till the end of April 2023 gave a trade surplus of US$ 15.614 billion or decreased by 22.90% year-on-year.
Taiwan’s consumer price index (CPI) increased by 2.35% in April 2023 compared with the same month of previous year, same as the inflation rate of previous month. The core inflation rate excluding prices of the energy and food increased by 2.72% in April 2023, which would be 0.17 percentage points higher than the core inflation rate in March 2023. In addition, the producer price index (PPI) decreased by 1.98% in April 2023 on the year-on-year basis, which would be 2.20 percentage points lower than the previous month caused by the fact that the global commodity prices have been significantly dropping.
As for exchange rate, the NTD went weaker due to the relative trend of USD exchange rate in April 2023. The NTD/USD stood at 30.74 in late April 2023, indicating a 0.93% depreciation. Regarding the over-night call rate; the lowest and highest rate in April 2023 stood at 0.680% and 0.689% respectively with respect to the recent monetary policy by the central bank of Taiwan.

Business Survey Outcomes

The portion of manufacturing firms who perceived business were better than expected in the target month was 9.8% or decreased by 20.9 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 46.4% or increased by 24.8 percentage points than 21.6% of respondents perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 43.8% or decreased by 3.9 percentage points than the ratio of previous month’s respondents perceiving constant business. Overall, manufacturing firms perceived the business in the target month was more pessimistic compared with the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 27.3% in the target month or increased by 6.1 percentage points than 21.2% 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 24.5% or increased by 0.2 percentage points compared with 24.3% 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 48.2% or decreased by 6.4 percentage points compared with 54.6% of respondents feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was more neutral and somewhat optimistic compared with the previous month.
As a result, the manufacturing composite indicator for April 2023 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 93.14 points in March 2023 moved down to 91.08 points in April 2023. Figure 1 shows a decrease of 2.06 points.
Moreover, the TIER service sector composite indicator for April 2023 on moving average also saw a downward correlation, and from a revision of as 99.1 points in March 2023 moved down to 98.56 points in April 2023. Figure 1 shows a decrease of 0.54 points.
In addition, the TIER construction sector composite Indicator for April 2023 adjusted for the seasonal factors on moving average saw an upward correlation, and from a revision of 91.33 points in March 2023 went up to 95.06 points in April 2023. Figure 1 shows an increase of 3.73 points.

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 April survey and are expected to deteriorate over the next six months include:
Wood and Bamboo Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Motorcycles Parts Manufacturing, Bicycles Parts Manufacturing, Wholesale, Securities.

● Manufacturers’ sentiments that have been in decline in the April survey, but are expected to improve over the next six months include:
Food, Soft Drink Manufacturing, Fabric Mills , Paper Manufacturing, Metal Structure and Architectural Components Manufacturing, Data Storage Media Units Manufacturing and Reproducing.

● Manufacturers’ sentiments that have been in decline in the April survey and are expected to remain sluggish over the next six months include:
Manufacturing, Slaughtering, Textiles Mills, Yarn Spinning Mills, Industrial Chemicals, Petrochemicals Manufacturing, Plastics and Rubber Raw Materials, Man-made Fibers Manufacturing, Chemical Products Manufacturing, Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing, Plastic Products Manufacturing, Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Cement and Cement Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Electrical Machinery, Electric Wires and Cables Manufacturing, Electronic Parts and Components Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Motorcycles Manufacturing, Precision Instruments Manufacturing, Education and Entertainment Articles Manufacturing, Real Estate Investment, Insurance.

● Manufacturers surveyed who felt the April outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Bicycles Manufacturing.

● Manufacturers surveyed who felt the April outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Frozen Food Manufacturing, Edible Oil Manufacturing, Flour Milling and Grain Husking, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Printing, Glass and Glass Products Manufacturing, Electrical Machinery, Supplies Manufacturing and Repairing, Audio and Video Electronic Products Manufacturing, Basic Civil Structure Construction, Retail Sales, Banks, Telecommunication Services.

● Manufacturers surveyed who felt the April outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Prepared Animal Feeds Manufacturing, Leather, Fur and Allied Product Manufacturing, Electrical Appliances and Housewares Manufacturing, Electronic Machinery, Construction, Transportation and Storage.

● Manufacturers’ sentiments that have improved in the April survey and is expected to deteriorate over the next six months include:
None.

● Manufacturers’ sentiments that have improved in the April survey and is expected to remain upbeat over the next six months include:
Communications Equipment and Apparatus Manufacturing, Restaurants and Hotels.

● Manufacturers’ sentiments that have improved in the April survey and the trend is expected to continue for the next six months include:
Motor Parts Manufacturing.