The Taiwanese Economy in January 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.
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 28.412 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.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 35.4% or decreased by 12.6 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 11.9% or decreased by 0.5 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 52.8% or increased by 13.2 percentage points compared with 39.6% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was rather neutral with somewhat optimism compared with the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 24.9% in the target month or decreased by 5.9 percentage points than 30.8% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 11.2% or decreased by 4.1 percentage points compared with 15.3% 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 63.9% or increased by 10.0 percentage points compared with 53.9% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also rather neutral and slightly optimistic compared with the previous month.
The manufacturing composite indicator for January 2021 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 106.01 points in December 2020 moved up to 106.42 points in January 2021. Figure 1 shows an increase of 0.41 points, the 9th month of consecutive increase.
The TIER service sector composite indicator for January 2021 adjusted for seasonal factors on moving average also saw an upward correlation, and from a revision of as 96.72 points in December 2020 moved up to 98.02 points. Figure 1 shows an increase of 1.30 points, the second month of consecutive increase.
In addition, the TIER Construction Sector Composite Indicator for January 2021 adjusted for the seasonal factors on moving average however saw a downward correlation, and from a revision of 108.96 points in December 2020 went down to 106.73 points in January 2021. Figure 1 shows a decrease of 2.23 points, the 3rd month of decrease in a row, as the government's housing policies has started to take effect.

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 January survey and are expected to deteriorate over the next six months include:
Restaurants and Hotels.
　 　
● Manufacturers' sentiments that have been in decline in the January survey, but are expected to improve over the next six months include:
Printing, Cement and Cement Products Manufacturing, Audio and Video Electronic Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Bicycles Manufacturing, Bicycles Parts Manufacturing.
　 　
● Manufacturers' sentiments that have been in decline in the January survey and are expected to remain sluggish over the next six months include:
Apparel, Clothing Accessories and Other Textile Product Manufacturing, Glass and Glass Products Manufacturing, Motor Parts Manufacturing, Motorcycles Manufacturing, Construction, Basic Civil Structure Construction, Real Estate Investment.
　 　
● Manufacturers surveyed who felt the January 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 January 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, Fabric Mills, Industrial Chemicals, Petrochemicals Manufacturing, Plastics and Rubber Raw Materials, Non-metallic Mineral Products Manufacturing, Iron and Steel Basic Industries, Electrical Machinery, Supplies Manufacturing and Repairing, Communications Equipment and Apparatus Manufacturing.
　 　
● Manufacturers surveyed who felt the January outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Rubber Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Metal Structure and Architectural Components Manufacturing, Electronic Machinery, Transport Equipment Manufacturing and Repairing, Retail Sales, Transportation and Storage.
　 　
● Manufacturers' sentiments that have improved in the January survey and is expected to deteriorate over the next six months include:
Motor Vehicles Manufacturing.
　 　
● Manufacturers' sentiments that have improved in the January survey and is expected to remain upbeat over the next six months include:
Leather, Fur and Allied Product Manufacturing, Wood and Bamboo Products Manufacturing, Paper Manufacturing, Man-made Fibers Manufacturing, Chemical Products Manufacturing, Petroleum and Coal Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Electrical Machinery, Electric Wires and Cables Manufacturing, Electrical Appliances and Housewares Manufacturing, Electronic Parts and Components Manufacturing, Precision Instruments Manufacturing, Education and Entertainment Articles Manufacturing, Banks, Securities.
　 　
● Manufacturers' sentiments that have improved in the January survey and the trend is expected to continue for the next six months include:
Food, Slaughtering, Frozen Food Manufacturing, Edible Oil Manufacturing, Flour Milling and Grain Husking, Soft Drink Manufacturing, Prepared Animal Feeds Manufacturing, Plastic Products Manufacturing, Motorcycles Parts Manufacturing, Wholesale, Insurance, Telecommunication Services.