The Taiwanese Economy in February 2020
Most international forecasting agencies have adjusted their forecasts
for this year downward due to the outbreak of coronavirus. As Taiwan
and global economy are highly correlated, the composite indicators
issued by the Taiwan Institute of Economic Research (TIER) continue
to decline. At this moment, it is still uncertain when relevant
impacts can be contained.
Taiwan's exports in February 2020 increased by significantly 24.92%
compared with the same month of 2019. Regarding imports, Taiwan's
imports in February 2020 also increased by 44.66% compared with
imports in February of 2019 due to base distortion that the lunar
new year was in February last year, and it was in January this year.
Taiwan's consumer price index (CPI) decreased by 0.21% in February
2020 compared with the same month of previous year due to the prices
of most consumption goods were relatively lower with respect to
the higher base effect of 2019. The core inflation rate excluding
prices of the energy and food dropped by 0.38% in February 2020.
In addition, the wholesale price index (WPI) moved down by 4.47%
in February 2020 on the year-on-year basis due to the fact that
commodity prices dropped continuously.
As for exchange rate, the NTD similar to all other major currencies
in the world went somewhat weaker due to the relatively stronger
USD. The NTD/USD stood at 30.33 in late February 2020 indicating
a 0.26% depreciation. Regarding the interest rate, it remained low
and steady in February 2020 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 2020 stood
at 0.171% and 0.190% respectively. The CBC cut the rediscount rate
by 0.25 percentage points on 19th March 2020.
Business Outlook
The portion of manufacturing firms who perceived business were
better than expected in the target month was 15.4% or decreased
by 4.7 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 48.3% or increased
by 0.4 percentage points than 47.9% perceiving worse business of
the previous month. The portion of manufacturing firms who perceived
business remained constant in the target month was 36.3% or decreased
by 5.0 percentage points compared with 41.3% perceiving constant
business in the previous month. Overall, manufacturing firms perceived
the business in the target month was somewhat pessimistic than the
previous month.
In addition, the portion of manufacturers who perceived business
would be better in the next six months was 19.3% in the target month
or decreased by 6.0 percentage points than 25.3% feeling more optimistic
about the future in the previous month. The portion of firms who
perceived the economic outlook would be worsening was 36.9% or increased
by 9.8 percentage points compared with 27.1% 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 43.8% or decreased by 3.8 percentage points compared with
47.6% feeling neutral about the business outlook one month earlier.
Overall, manufacturing firms perceived the business in the near
future was also more pessimistic compared with the previous month
due to the uncertain impacts of corona virus.
The manufacturing composite indicator for February 2020 adjusted
for seasonal factors on moving average, saw a downward correction,
and from a revision of as 94.04 points in January 2020 moved down
to 88.73 points. Figure 1 shows a decrease of 5.31 points, the second-month
consecutive dip.
The TIER service sector composite indicator for February 2020 adjusted
for seasonal factors on moving average saw a downward correlation,
and from a revision of as 89.88 points in January 2020 moved down
to 86.09 points. Figure 1 shows a decrease of 3.79 points, the second-month
consecutive decline.
In addition, the TIER Construction Sector Composite Indicator for
the second-month consecutive dip. adjusted for seasonal factors
on moving average, also saw a downward correction, and from a revision
of 95.72 points in January 2020 went down to 90.02 points. Figure
1 shows a decrease of 5.70 points.
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:
Yarn Spinning Mills, Leather, Fur and Allied Product Manufacturing,
Wood and Bamboo Products Manufacturing, Printing, Industrial Chemicals,
Petrochemicals Manufacturing, Plastics and Rubber Raw Materials,
Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing,
Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic
Products Manufacturing, Glass and Glass Products Manufacturing,
Cement and Cement Products Manufacturing, Fabricated Metal Products
Manufacturing, Metal Dies, Screw, Nut Manufacturing, Machinery and
Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing,
Industrial Machinery, Electric Wires and Cables Manufacturing, Communications
Equipment and Apparatus Manufacturing, Data Storage Media Units
Manufacturing and Reproducing, Transport Equipment Manufacturing
and Repairing, Motor Parts Manufacturing, Bicycles Manufacturing,
Bicycles Parts Manufacturing, Education and Entertainment Articles
Manufacturing, Wholesale, Restaurants and Hotels, Banks, Telecommunication
Services.
● Manufacturers' sentiments that have been in decline in the February
survey, but are expected to improve over the next six months include:
Fabric Mills, Electrical Machinery, Supplies Manufacturing and Repairing.
● Manufacturers' sentiments that have been in decline in the February
survey and are expected to remain sluggish over the next six months
include:
Soft Drink Manufacturing, Textiles Mills, Man-made Fibers Manufacturing,
Chemical Products Manufacturing, Electrical Machinery, Electronic
Machinery, Audio and Video Electronic Products Manufacturing, Electronic
Parts and Components Manufacturing, Construction, Retail Sales,
Transportation and Storage.
● 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:
Iron and Steel Basic Industries, Motor Vehicles Manufacturing, Motorcycles
Parts Manufacturing.
● 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:
Food, Precision Instruments Manufacturing.
● 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, Frozen Food Manufacturing, Apparel, Clothing Accessories
and Other Textile Product Manufacturing, Paper Manufacturing, Plastic
Products Manufacturing, Metal Structure and Architectural Components
Manufacturing, Electrical Appliances and Housewares Manufacturing,
Insurance.
● Manufacturers' sentiments that have improved in the February survey
and is expected to deteriorate over the next six months include:
Real Estate Investment, Securities.
● Manufacturers' sentiments that have improved in the February survey
and is expected to remain upbeat over the next six months include:
None.
● Manufacturers' sentiments that have improved in the February survey
and the trend is expected to continue for the next six months include:
Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain
Husking, Prepared Animal Feeds Manufacturing, Motorcycles Manufacturing,
Basic Civil Structure Construction.

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