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.