The Taiwanese Economy in September 2024

Global manufacturing recovery remains weak, however, as the US and European central banks enter into rate-cutting cycles, this should help boost consumption and investment momentum. Furthermore, while China has recently introduced various economic support policies that should boost financial market confidence in the short term, the effectiveness of these stimulus measures remains to be seen.
In Taiwan's domestic manufacturing sector, global market demand momentum remains weak, and coupled with the impact of low-priced imported steel products and overseas chemical production capacity, affecting traditional industries' export and production performance in September, leading to a worsened outlook for the current month. However, as major countries' monetary policies shift from tight to loose, this will help stimulate overseas demand, leading manufacturers to have a more optimistic outlook for the next six months compared to last month's survey. In the service sector, the peak consumption periods of summer vacation and Ghost Festival have ended, leading the accommodation and food service activities to a worsened outlook for the current month. However, benefiting from the intensive scheduling of leisure entertainment, sporting events, and cultural activities attracting consumers, along with wholesale businesses continuing to expand their outlets, domestic demand remains stable, contributing to retailers and wholesalers maintaining an optimistic outlook over the next six months.
In the construction sector, as the government continues to advance public works projects and biotechnology pharmaceutical companies actively build new production lines, driving increased demand for factory offices and civil engineering projects, coupled with the government's extension of tax reduction measures for key raw materials, helping to reduce construction cost pressures, the construction industry saw improvement in September. Looking ahead, construction costs remain high, and with uncertainties in the future real estate market outlook, property developers are taking a more conservative approach to new projects, weakening demand for housing construction projects, and the construction industry outlook is expected to remain constant. Furthermore, major domestic real estate agencies reported a significant decline in housing transactions in September, indicating that tighter mortgage lending has begun to affect the real estate market. With the central bank implementing new anti-speculation measures to further tighten market liquidity, mortgage conditions will be less favorable in the short term, leading to a pessimistic outlook for the real estate sector's current month performance. In the short term, policy controls and banks' tightening of mortgage funding will adversely affect the real estate market's performance over the next six months.
According to the Taiwan Institute of Economic Research (TIER), after model simulations, the Composite Indicators for the manufacturing, service, and construction sectors show a downward shift.
Firstly, in terms of Taiwan's foreign trade, while global manufacturing recovery varies in pace and strength, strong AI business opportunities and the peak season for consumer electronics have led to continued growth in electronics and ICT product exports. Regarding major export products, benefiting from robust AI and high-performance computing opportunities, along with international brands' new product stocking effects, ICT and audio-visual products maintained high year-over-year growth rates, while electronic components saw increased growth rates driven by AI opportunities and new electronic product launches.
In domestic production, ICT and electronics performance remained strong, while in traditional industries, only mechanical equipment continued to show positive growth, with other traditional production momentum remaining weak, resulting in September's manufacturing production index of 99.40, a 2.69% decrease from the previous month but a 12.11% increase year-over-year. Looking at specific industries, continued strong demand for AI, high-performance computing, and cloud data services stimulated ongoing strong production momentum in the ICT and electronics industry. In traditional industries, global market demand was weaker than expected, and combined with the impact of low-priced imported steel products and overseas chemical production capacity, manufacturers responded with maintenance-related production cuts, causing September's basic metals and chemical materials and fertilizer industry production indices to show decline. The automobile and parts industry continued to see double-digit declines in production index due to parts shortages for some models, pre-model change production line adjustments, and competition from imported vehicles affecting gasoline-powered and electric passenger car production. Overall, industrial production for the first three quarters of 2024 grew 10.91% compared to the same period last year, with manufacturing growing 11.34%.
Regarding prices, vegetable supply stabilized in September, reducing food price annual growth from 4.64% in August to 3.00% in September, contributing 0.82 percentage points to the total index, down 0.43 percentage points from the previous month. Affected by continued international oil price declines, transportation and communication prices showed negative growth, reducing their impact on the total index by 0.09 percentage points compared to the previous month. September's overall CPI annual growth rate decreased from August's 2.35% to 1.82%, while the core CPI annual growth rate slightly decreased from August's 1.80% to 1.79%.
On the financial market side, market funding conditions remained stable, with September 2024 financial sector overnight lending rates ranging from a high of 0.827% to a low of 0.811%, with a weighted average rate of 0.820%, unchanged from the previous month but up 0.133 percentage points from September 2023. Regarding the stock market, the first half of the month saw U.S. economic data again raising financial market concerns about economic prospects, increasing risk aversion, and weakening U.S. stocks, which affected Taiwan stock market investor confidence. However, in the latter half of the month, as the Federal Reserve began its rate-cutting cycle, market uncertainties temporarily subsided, driving a stock market recovery, resulting in a slight decline in the Taiwan stock market in September, with the Taiwan Weighted Index closing at 22,224.54 points, down 0.20%, with an average daily trading volume of 347.333 billion TWD.

Business Survey Outcomes

The proportion of manufacturing firms that perceived their business as better than expected in the target month was 16.7%, a decrease of 2.6 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 36.9%, an increase of 4.9 percentage points compared to the 32.0% 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 46.4%, which decreased by 2.3 percentage points compared to the ratio of respondents from the previous month who perceived their business as constant. Furthermore, in the target month, the segment of manufacturers who anticipated an improvement in their business over the next six months stood at 28.2%, representing an advance of 7.9 percentage points compared to the 20.3% 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 28.8%, marking an increase of 6.2 percentage points compared to the 22.6% of respondents who held a more pessimistic view of the near future in the previous month. Meanwhile,43.1% of manufacturing firms perceived their business outlook as remaining constant in the next six months, decreasing compared to the 57.0% of respondents one month earlier. Overall, manufacturing firms hold confidence in the near-term business outlook.
The TIER Manufacturing Composite Indicator for September 2024, adjusted for seasonal factors, underwent a corrective decline. The index for September 2024 stands at 94.82 points, a decrease of 1.73 points from the revised 96.55 points of the previous month, marking the fourth consecutive month of decline.
In addition, the TIER Service Sector Composite Indicator for September 2024 exhibited a downward trajectory. It moved from a revised value of 96.20 points in the previous month to 91.43 points in September 2024, a decrease of 4.77 points, marking the third straight month of decline.
Lastly, the TIER Construction Sector Composite Indicator for September 2024, adjusted for seasonal factors, stood at 101.21 in September, down 6.22 points from August’s 107.43, marking the third consecutive month of decline.

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