The Taiwanese Economy in February 2021

As major economies in the world have been developing and acquiring vaccines for coping with COVID-19, their confirmed cases have been reducing indicating that it's expected the global economy will be back on track soon. Since the recovery seems more likely, Taiwan's economy can further be on a growing binge. In addition to that, the composite indicators of manufacturing as well as services issued by the Taiwan Institute of Economic Research (TIER) signal optimism in January 2021 yet again.

Taiwan's exports in January 2021 increased by 36.8% compared with the same month of 2020 thanks to a strong market demand for ICT parts and components in addition to lower base effect. Regarding imports, Taiwan's imports in January 2021 increased by 29.9% compared with imports in January of 2020; lower base effect would be the main cause. On the cumulative basis, Taiwan's exports and imports from January 1st till January 31st of 2021 gave a trade surplus as at US$ 6.19 billion or increased by 80.2% on the year-on-year basis.

Taiwan's consumer price index (CPI) decreased by 0.16% in January 2021 compared with the same month of previous year, because the lunar new year was in January last year picking up consumer prices and a higher base effect. The core inflation rate excluding prices of the energy and food increased by 0.07% in January 2021 meaning the domestic demand was actually rather strong. In addition, the wholesale price index (WPI) decreased by 2.86% in January 2021 on the year-on-year basis due to the fact that global commodity prices dropped continuously.

tood at 28.412 in late January 2021 indicating a 0.34% appreciation. Regarding the interest rate, it remained low and steady in January 2021 due to the continued loose monetary operations by the CBC with respect to the most recent CPI reading; the lowest and highest over-night call rate in January 2021 stood at 0.078% and 0.080% respectively.The global economy seems to be at the phase of getting out of the woods, as optimistic outlook continues, such as mounting leading indicators as well as increasing PMIs. As the global demands are recovering, exports orders of not only ICT but also traditional manufacturing items of Taiwan have been rising. As a result, the composite indicators issued by the Taiwan Institute of Economic Research (TIER) signal optimism in general in February 2021 over again.

Taiwan's exports in February 2021 increased by 9.67% compared with the same month of 2020 thanks to a strong market demand for ICT parts and components in addition to lower base effect, the COVID-19 impacts. Regarding imports, Taiwan's imports in February 2021 increased by 5.66% compared with imports in February of 2020; lower base effect would further be the main cause. On the cumulative basis, Taiwan's exports and imports from January 1st till the end of February in 2021 gave a trade surplus as at US$ 10.7 billion.

Taiwan's consumer price index (CPI) increased by 1.37% in February 2021 compared with the same month of previous year, because the lunar new year was in February this year, and it was in January last year, so there's a seasonal twist effect. The core inflation rate excluding prices of the energy and food increased by 1.63% in February 2021 meaning the domestic demand was actually rather strong. In addition, the wholesale price index (WPI) decreased by 0.35% in February 2021 on the year-on-year basis due to the fact that global commodity prices dropped unceasingly at least for now.

As for exchange rate, the NTD went further stronger due to the relatively weaker USD as well as flowing in hot money. The NTD/USD stood at 28.306 in late February 2021 indicating a 0.37% appreciation. Regarding the interest rate, it remained low and steady in February 2021 due to the continued loose monetary operations by the CBC with respect to the most recent CPI reading; the lowest and highest over-night call rate in February 2021 stood at 0.079% and 0.089% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 33.2% or decreased by 3.1 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 21.3% or increased by 8.9 percentage points than 12.4% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 45.5% or decreased by 5.9 percentage points compared with 51.4% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was rather neutral with somewhat pessimistic compared with the previous month due to less business days of lunar new year.

In addition, the portion of manufacturers who perceived business would be better in the next six months was 52.1% in the target month or increased significantly by 26.3 percentage points than 25.8% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 4.3% or decreased by 6.6 percentage points compared with 10.9% 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 43.6% or decreased by 19.7 percentage points compared with 63.3% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also rather optimistic compared with the previous month.

The manufacturing composite indicator for February 2021 adjusted for seasonal factors on moving average, saw a mild downward correction, and from a revision of as 106.53 points in January 2021 moved down somewhat to 106.04 points in February 2021. Figure 1 shows a slight decrease of 0.49 points, actually put an end to the previous nine-month of consecutive increasing binge. However, the current reading is still considered as quite promising in business outlook.

The TIER service sector composite indicator for February 2021 adjusted for seasonal factors on moving average saw an upward correlation, and from a revision of as 98.51 points in January 2021 moved up to 99.52 points. Figure 1 shows an increase of 1.01 points, the third month of consecutive increase.

In addition, the TIER Construction Sector Composite Indicator for February 2021 adjusted for the seasonal factors on moving average also saw an upward correlation, and from a revision of 108.39 points in January 2021 went up to 110.31 points in February 2021. Figure 1 shows an increase of 1.92 points, the first month of increase after a three-month of decrease in a row.

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