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The Taiwanese Economy in March 2024
Due to continued strength in US employment and consumer spending, the IMF has significantly upgraded its forecast for US economic growth in 2024. Additionally, global demand has notably improved, contributing to a turnaround in manufacturing performance. Manufacturing Purchasing Managers’ Indicator (PMI) for the US, China, Japan, and ASEAN countries have all shown upward trends in recent months, indicating a global manufacturing outlook rebound. However, geopolitical turmoil has continued to impact international raw material prices, warranting attention.
Regarding the Taiwanese economy, the ongoing robust opportunities in emerging technologies such as artificial intelligence (AI), coupled with a general revival in traditional manufacturing exports and production, have led to increases in Taiwan’s manufacturing exports, production index, and export orders compared to the previous month. Consequently, the proportion of manufacturers in Taiwan optimistic about the current month’s economic performance has notably increased compared to the previous month. The service industry has benefited from the active trading in the Taiwanese stock market, leading to significant increases in sales of dividend policies. This has contributed to optimism among financial-related service industries regarding the current month’s economic performance. Although facing challenges of rising costs, the construction industry continues to benefit from reconstruction and public works projects, as well as the economic recovery and resurgence in manufacturing. This has driven demand for residential and commercial real estate for self-use in the short term, thus maintaining a certain level of confidence in Taiwan’s housing market.
Based on these developments, the Taiwan Institute of Economic Research (TIER) forecasts that Taiwan’s GDP growth rate will reach 3.29% in 2024, marking a positive adjustment of 0.14 percentage points from its previous forecast in January this year.
In terms of Taiwan’s foreign trade, the continuous robust opportunities in emerging technologies such as AI, coupled with the general revival in traditional manufacturing exports and factors such as a lower base period compared to the previous year, have resulted in a significant expansion of the year-on-year export growth rate from 1.3% last month to 18.9% in March, 2024. The year-on-year import growth rate has also reversed from a significant decline of 17.9% last month to a growth of 7.1%. Cumulatively, in the first quarter of 2024, exports grew by 12.9% compared to the same period last year, while imports increased by 2.9%. Overall, the trade surplus for the first quarter of 2024 amounted to US$18.96 billion, a growth of 111.5%.
As for prices, Taiwan’s overall CPI year-on-year growth rate decreased from 3.08% in February to 2.14% in March, 2024, while the core CPI year-on-year growth rate also decreased from 2.89% in February to 2.13%. Regarding the PPI, the prices of petroleum and coal products increased, coupled with the electricity price adjustment in April last year and the depreciation of the NT Dollar against the US Dollar, resulting in a slight expansion of the overall PPI year-on-year growth rate from 0.13% in February to 0.34% in March, 2024. Cumulatively, in the first quarter of 2024, the CPI year-on-year growth rate was 2.34%, while the PPI year-on-year growth rate was -0.08%.
In the domestic financial market, following the announcement by the central bank (CBC) on March 21st to raise key interest rates by half a basis point, coupled with continued fervor in the stock market, the market’s funding environment leaned toward tightness. In March 2024, the overnight interbank lending rate in the financial industry ranged from a high of 0.811% to a low of 0.688%, with a weighted average rate of 0.739%, representing an increase of 0.046 percentage points from the previous month and a 0.141 percentage point increase compared to the same month in 2023. Regarding Taiwan’s stock market, driven by the ETF boom and large-scale ETF positions in major Taiwan stock ETFs, mutual funds heavily bought Taiwan stocks. Supported by mainstream niche sectors such as AI and semiconductors, Taiwan stocks reached historic highs again. The TAIEX closed at 20,294.45 points at the end of March, surging by 7.00%, with an average daily trading volume of NT$ 479.286 billion. Furthermore, the market’s ongoing adjustment of expectations for a US interest rate cut strengthened the US dollar, which in turn affected the NT Dollar as non-dollar currencies depreciated. At the end of the month, the exchange rate stood at 31.99 NT dollars against the US dollar, representing a depreciation of 1.29%.
Business Survey Outcomes
The proportion of manufacturing firms that perceived their business as better than expected in the target month was 48.6%, an increase of 37.4 percentage points compared to respondents who perceived their business as better in the previous month. On the other hand, the proportion of those who perceived their business as worsening in the target month was 11.3%, a decrease of 25.2 percentage points compared to the 36.5% of respondents who perceived their business as worsening in the previous month. Additionally, the proportion of manufacturing firms that perceived their business as remaining constant in the target month was 40.0%, which decreased by 12.2 percentage points compared to the ratio of respondents from the previous month who perceived their business as constant. In general, manufacturing firms seemed to express a rather optimistic stance regarding their business outlook.
Furthermore, in the target month, the segment of manufacturers who anticipated an improvement in their business over the next six months stood at 43.5%, representing a decrease of 7.0 percentage points compared to the 50.5% of respondents who were more optimistic about the near future in the previous month. Conversely, the portion of firms foreseeing a deteriorating economic outlook was 11.2%, marking an increase of 0.7 percentage points compared to the 10.5% of respondents who held a more pessimistic view of the near future in the previous month. Meanwhile, 45.3% of manufacturing firms perceived their business outlook as remaining constant in the next six months, showing an increase of 6.4 percentage point compared to the 38.9% of respondents who maintained a neutral stance on the business outlook one month earlier. Overall, manufacturing firms appeared to hold a somewhat neutral to optimistic view of the business outlook in the near future.
The TIER Manufacturing Composite Indicator for March 2024, adjusted for seasonal factors, underwent a corrective upturn. It increased from the revised figure of 98.22 points in February to 99.10 points in March 2024, marking an increase of 0.88 points, as illustrated in Figure 1.
In addition, the TIER Service Sector Composite Indicator for March 2024, analyzed as a moving average, also exhibited an upward trajectory. It rose from a revised value of 92.49 points in February to 95.02 points in March 2024, reflecting an increase of 2.53 points, as depicted in Figure 1.
Lastly, the TIER Construction Sector Composite Indicator for March 2024, adjusted for seasonal factors and observed as a moving average, demonstrated a descending trend. It dropped from the revised figure of 103.48 points in February to 103.24 points in March 2024, illustrating a slight decrease of 0.24 points, as shown in Figure 1.
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 March survey and are expected to deteriorate over the next six months include:
None.
Manufacturers’ sentiments that have been in decline in the March survey, but are expected to improve over the next six months include:
Basic Civil Structure Construction.
Manufacturers’ sentiments that have been in decline in the March survey and are expected to remain sluggish over the next six months include:
Motorcycles Manufacturing, Motorcycles Parts Manufacturing, Restaurants and Hotels, Transportation and Storage.
Manufacturers surveyed who felt the March outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Wholesale.
Manufacturers surveyed who felt the March outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Textiles Mills, Yarn Spinning Mills, Paper Manufacturing, Petroleum and Coal Products Manufacturing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Precision Instruments Manufacturing, Retail Sales, Telecommunication Services.
Manufacturers surveyed who felt the March outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Electronic Machinery, Transport Equipment Manufacturing and Repairing, Motor Parts Manufacturing, Education and Entertainment Articles Manufacturing.
Manufacturers’ sentiments that have improved in the March survey and is expected to deteriorate over the next six months include:
Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing,
Manufacturers’ sentiments that have improved in the March survey and is expected to remain upbeat over the next six months include:
Manufacturing, Food, Frozen Food Manufacturing, Edible Oil Manufacturing, Flour Milling and Grain Husking, Soft Drink Manufacturing, Fabric Mills, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Wood and Bamboo Products Manufacturing, Industrial Chemicals, Petrochemicals Manufacturing, Man-made Fibers Manufacturing, Rubber Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electric Wires and Cables Manufacturing, Audio and Video Electronic Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Construction, Real Estate Investment, Banks.
Manufacturers’ sentiments that have improved in the March survey and the trend is expected to continue for the next six months include:
Slaughtering, Prepared Animal Feeds Manufacturing, Leather, Fur and Allied Product Manufacturing, Printing, Plastics and Rubber Raw Materials, Chemical Products Manufacturing, Plastic Products Manufacturing, Glass and Glass Products Manufacturing, Electrical Appliances and Housewares Manufacturing, Communications Equipment and Apparatus Manufacturing, Motor Vehicles Manufacturing, Securities, Insurance..
TIER Forecast (issued on 25th April, 2024.)
(NT$100 million, Chained (2016) Dollars)
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