The Taiwanese Economy in October 2024

Global economic growth remains moderate, with manufacturing recovery still constrained. Monetary policy easing across major economies is expected to stimulate trade momentum. The prospect of Trump's return to presidency has elevated market uncertainties, with significant implications for global geopolitical and economic dynamics.
In domestic production, despite persistent demand for emerging technology applications, traditional industries continue to show weak recovery momentum, with weak petrochemical exports. This has led manufacturers to express a slightly more pessimistic view of the current month's economic conditions compared to the previous month's survey. It is anticipated that Trump's presidency could trigger a new wave of U.S.-China trade tensions, potentially impacting Chinese manufacturing and domestic supply chain demand. The chemicals and chemical products sectors have downgraded their six-month economic outlook. In the service sector, despite typhoon-related disruptions, the launch of department store anniversary sales campaigns, coupled with stable stock market performance in October, has contributed to positive economic outlooks in the retail and securities sectors.
Construction sector's Composite Indicators exhibited an upward trend, primarily driven by optimistic six-month projections stemming from enhanced public infrastructure allocations and ongoing high-tech facility expansions. However, the real estate sector has experienced declining October transaction volumes and subdued market demand due to expanded central bank credit controls, stricter mortgage approval processes, and rising interest rates. Market demand is expected to recover only after lending conditions are relaxed.
According to the Taiwan Institute of Economic Research (TIER), after model simulations, the Composite Indicators for manufacturing showed a declining trend, while service and construction sectors reversed their previous three-month downward trend to show an upturn in October 2024.
Firstly, in foreign trade, AI-driven demand sustained electronics and ICT export growth, while petrochemical exports remained subdued. AI and high-performance computing continued to drive electronic product exports, despite traditional sector weakness. Import dynamics reflect robust AI-related electronic component and semiconductor equipment procurement, though industrial materials and consumer goods imports moderated. Cumulative exports from January to October 2024 grew 9.96% compared to the same period last year, while imports grew 9.75%, resulting in a trade surplus of US$66.448 billion, an increase of 11.01%.
Regarding prices, egg and fruit price increases have moderated, though typhoon-related agricultural losses have pushed up vegetable prices. Food price inflation decreased from September's 3.00% to October's 2.70%, contributing 0.74 percentage points to the overall index, down 0.08 percentage points from the previous month. Overall, except for a notable increase in the miscellaneous category's price index compared to September, food, housing, healthcare, and education/entertainment categories all showed reduced inflation rates, while clothing prices turned negative, and transportation and communications prices showed larger decreases. October's overall CPI inflation rate decreased from September's 1.82% to 1.69%, while core CPI inflation fell from 1.78% to 1.64%.
Financial markets maintained stable liquidity conditions, with overnight interbank rates averaging 0.823% (+0.003 MoM, +0.131 YoY). Regarding the stock market, U.S. non-farm employment data exceeded financial market expectations, boosting confidence in a soft landing for the economy and driving U.S. stock gains. Taiwan's stock market followed suit, further supported by strong earnings reports and forecasts from domestic foundry leaders, leading to increased trading volume and market gains. The Taiwan Weighted Index closed at 22,820.43 points at the end of October, up 2.68%, with average daily trading volume of TWD 374.878 billion. In terms of exchange rates, hawkish messages from Federal Reserve officials combined with better-than-expected U.S. economic data weakened market expectations for significant Fed rate cuts. Additionally, escalating Middle East tensions further supported the U.S. dollar, causing major Asian currencies to weaken against it. The Taiwan dollar showed a depreciation trend in October, closing the month at 32.031 to the U.S. dollar, down 1.19%.

Business Survey Outcomes

The proportion of manufacturing firms that perceived their business as better than expected in October was 16.0%, a decrease of 1.6 percentage points compared to the 17.6% in the previous month. On the other hand, the proportion of those who perceived their business as worsening in the target month was 35.2%, an increase of 1.9 percentage points compared to the 33.3% reported in the previous month. Additionally, the proportion of manufacturing firms that perceived their business as remaining constant in the target month was 48.8%, a slight decrease of 0.4 percentage points compared to the 49.2% recorded in the previous month.
Furthermore, in the target month, the segment of manufacturers who anticipated an improvement in their business over the next six months stood at 22.9%, representing a decline of 1.0 percentage points compared to the 23.9% recorded in September. Conversely, the proportion of firms foreseeing a deteriorating economic outlook was 21.0%, marking a sharp decrease of 7.8 percentage points from the 28.8% reported one month earlier. Meanwhile, 56.0% of manufacturing firms perceived their business outlook as remaining constant over the next six months, an increase from 47.3% in the previous month.
Overall, manufacturers are adopting a reserved stance regarding their outlook for the future.
The TIER Manufacturing Composite Indicator for October 2024, adjusted for seasonal factors, experienced a corrective decline. The index stood at 93.12 points in October 2024, down 1.75 points from a revised 94.87 points in the previous month, marking the fifth consecutive month of decline.
In addition, the TIER Service Sector Composite Indicator for October 2024 exhibited an upward trajectory, moving from a revised value of 91.32 points in the previous month to 92.15 points in October, an increase of 0.83 points. This marks a turnaround after three consecutive months of decline.
Lastly, the TIER Construction Sector Composite Indicator for October 2024, adjusted for seasonal factors, stood at 103.83, up 2.62 points from 101.21 in the previous month, thus ending a three-month 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 October survey and are expected to deteriorate over the next six months include:
Plastics and Rubber Raw Materials, Cutlery and Tools Manufacturing, Electrical Appliances and Housewares Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Motorcycles Manufacturing, Motorcycles Parts Manufacturing, Construction, Real Estate Investment.
　
Manufacturers’ sentiments that have been in decline in the October survey, but are expected to improve over the next six months include:
Frozen Food Manufacturing, Printing.
　
Manufacturers’ sentiments that have been in decline in the October survey and are expected to remain sluggish over the next six months include:
Soft Drink Manufacturing, Rubber Products Manufacturing, Plastic Products Manufacturing, Audio and Video Electronic Products Manufacturing, Education and Entertainment Articles Manufacturing, Transportation and Storage.
　
Manufacturers surveyed who felt the October outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Textiles Mills, Yarn Spinning Mills, Fabric Mills, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Leather, Fur and Allied Product Manufacturing, Industrial Chemicals, Petrochemicals Manufacturing, Man-made Fibers Manufacturing, Petroleum and Coal Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing.
　
Manufacturers surveyed who felt the October outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Food, Metal Dies, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electric Wires and Cables Manufacturing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Bicycles Parts Manufacturing, Precision Instruments Manufacturing, Basic Civil Structure Construction, Wholesale, Restaurants and Hotels, Banks.
　
Manufacturers surveyed who felt the October outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Slaughtering, Prepared Animal Feeds Manufacturing, Wood and Bamboo Products Manufacturing, Paper Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, crew, Nut Manufacturing, Machinery and Equipment Manufacturing and Repairing, Industrial Machinery, Bicycles Manufacturing.
　
Manufacturers’ sentiments that have improved in the October survey and is expected to deteriorate over the next six months include:
None.
　
Manufacturers’ sentiments that have improved in the October survey and is expected to remain upbeat over the next six months include:
Edible Oil Manufacturing, Flour Milling and Grain Husking, Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing, Electronic Parts and Components Manufacturing, Securities, Telecommunication Services.
　
Manufacturers’ sentiments that have improved in the October survey and the trend is expected to continue for the next six months include:
Chemical Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Glass and Glass Products Manufacturing, Motor Parts Manufacturing, Retail Sales, Insurance.