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The Fed is "closer" to cutting interest rates given inflation's improved trajectory
Taiwan's service sector holds up, manufacturers undercut their belief in the outlook |
Global economic expansion continued in the first half of 2024, with declining inflation prompting the U.S. Federal Reserve to potentially lower interest rates, benefiting stable growth in European and American demand. However, despite Japan nearing its positive wage-inflation cycle target, the yen's persistent depreciation continues to increase import costs for businesses and consumer pressure. China's economic growth rate reached 5.0% in the first half of the year, yet the government maintains loose policies to sustain economic momentum due to a weak real estate market and slow consumption recovery.
In Taiwan’s domestic manufacturing sector, export-oriented manufacturing industries showed mixed performance. Petrochemical raw materials faced oversupply, while mature semiconductor processes experienced continued competitive pressure. Only high-end chips and AI servers showed notable performance, causing the manufacturing production index and export order value to decline compared to the previous month, leading to a worsened outlook for the manufacturing sector. However, the service sector benefited from the stock market's record highs in June, increased freight rates due to vessel and container shortages and port congestion, and early seasonal demand boosting export volumes. This positively impacted financial services and transportation industries. ...Read more |
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| Should Low-Probability Risks Be Disregarded? |
| Life and the world are full of risks and uncertainties, making behavior under risk more complex than without. This article focuses on the causes and appropriateness of ignoring low-probability events. Neglecting tail risks is often the cause of financial crises. Financial personnel, institutions, and governments overlook these risks, leading to significant national and social damage when they occur. However, in lottery markets, small probabilities aren't always ignored. When potential losses or gains are large, such as accumulated jackpots, people are more likely to participate despite low odds. Using a coin toss game as an example, the St. Petersburg paradox explains why small probabilities are ignored. However, people's willingness to pay is low, attributed to the diminishing marginal utility of money. In reality, tail risk involves extreme losses rather than high rewards, where people may become numb to increasing damage, like Japan's Fukushima nuclear contamination issue. Individuals and businesses can avoid tail risks by not bearing full losses, thus underestimating or ignoring true risks based on short-term probabilities. This requires attention to environmental sustainability and long-term national development and security, as tail risks may emerge over decades or centuries. Long-term environmental and national risks cannot be discounted. (For more, please see the current monthly journal) |
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Taiwan Economic Research Monthly
Funding Sources for Creative Industries in the Digital and Sustainable Era |
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From 2019 to the present, a confluence of adverse global factors, including the COVID-19 pandemic, supply chain disruptions, logistical delays, and geopolitical turmoil, has precipitated a price surge worldwide. The global inflation rate reached 4.7% in 2021, with the International Monetary Fund (IMF) projecting an escalation to 8.8% in 2022 and 6.5% in 2023. In response, governments across the globe have implemented various measures to stabilize prices, such as tightening monetary policies and raising interest rates. These actions have significantly impacted small and medium-sized enterprises. According to the April 2024 survey by the National Federation of Independent Business (NFIB), confidence among U.S. small business owners fell to its lowest level since December 2012 in March 2024. SMEs play an indispensable role in many countries, and supporting their stable development is a key objective for governments worldwide. This month's featured articles explore critical business support measures in the U.S., Europe, Japan, and South Korea, providing reference for our government and enterprises in addressing potential challenges.
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