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The Taiwanese Economy in June 2024
Global economic expansion continued in the first half of 2024, with declining inflation prompting the U.S. Federal Reserve to potentially lower interest rates, benefiting stable growth in European and American demand. However, despite Japan nearing its positive wage-inflation cycle target, the yen's persistent depreciation continues to increase import costs for businesses and consumer pressure. China's economic growth rate reached 5.0% in the first half of the year, yet the government maintains loose policies to sustain economic momentum due to a weak real estate market and slow consumption recovery.
In Taiwan’s domestic manufacturing sector, export-oriented manufacturing industries showed mixed performance. Petrochemical raw materials faced oversupply, while mature semiconductor processes experienced continued competitive pressure. Only high-end chips and AI servers showed notable performance, causing the manufacturing production index and export order value to decline compared to the previous month, leading to a worsened outlook for the manufacturing sector. However, the service sector benefited from the stock market's record highs in June, increased freight rates due to vessel and container shortages and port congestion, and early seasonal demand boosting export volumes. This positively impacted financial services and transportation industries. The construction industry benefited from domestic economic recovery and public infrastructure projects, driving stable demand for civil engineering, commercial, residential, and factory construction. Real estate remained robust. According to the Taiwan Institute of Economic Research (TIER), after model simulations, the Composite Indicators for the manufacturing sector declined in June, while service and construction sectors continued to trend upward.
A stable job market, steady wage growth, and the wealth effect from this year's stock market performance have sustained private consumption momentum. Investment has benefited from the global AI boom, with domestic semiconductor manufacturers expanding advanced process and high-end packaging capacity. Manufacturers remain optimistic about future economic performance, strengthening business expansion intentions. Thus, private investment performance has improved from previous forecasts. External demand benefited from recovering global end-user demand and rising demand for emerging technology applications, resulting in better-than-expected export performance. Consequently, according to the Taiwan Institute of Economic Research's latest forecast, Taiwan's 2024 economic growth model remains tepid, with a projected GDP growth rate of 3.85%, revised upward by 0.56 percentage points from the previous forecast.
Firstly, in terms of Taiwan's foreign trade, benefiting from continued emerging technology application opportunities, restocking demand for traditional industries, and a lower comparison base from the previous year, June's export growth rate expanded from 3.4% to 23.5% year-on-year, while import growth turned from a slight 0.6% increase to 33.9%.
On the domestic side, except for the panel and components industry and the automotive and parts industry, which continued to decline, other sectors such as integrated circuits, basic metals, chemical materials and fertilizers, and machinery and equipment showed growth. The manufacturing production index in June was 93.34, decreasing 4.46% from the previous month but growing 13.50% year-on-year.
Regarding prices, despite egg oversupply causing price drops, fruit prices increased significantly due to June's heavy rainfall and a low base effect from the previous year. Combined with rising dining-out costs, this drove up overall food price inflation from 3.43% in May to 4.16% in June, contributing 1.11 percentage points to the total index, an increase of 0.19 percentage points from the previous month. The overall CPI annual growth rate expanded from 2.23% in May to 2.42% in June, while core CPI remained unchanged at 1.83%.
In the domestic financial market, the monetary environment remained tight. In June 2024, the overnight interbank lending rate peaked at 0.822%, with a low of 0.813%, and a weighted average rate of 0.819%, up 0.004 percentage points from the previous month and 0.133 percentage points year-on-year. On the stock market front, U.S. inflation data below market expectations boosted U.S. tech stocks. Coupled with anticipated recovery in the consumer electronics industry, AI-related stocks and electronic heavyweights led the market to record highs. The Taiwan Weighted Index closed at 23,032.25 points at the end of June, surging 8.77%, with an average daily trading volume of NT$492.214 billion.
Business Survey Outcomes
The proportion of manufacturing firms that perceived their business as better than expected in the target month was15.2%, a decrease of 13.3 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 31.0%, an increase of 14.5 percentage points compared to the 16.5% 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 53.8%, which slightly decreased by 1.2 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 38.3%, representing an increase of 6.2 percentage points compared to the 32.1% 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 23.0%, marking an increase of 7.9 percentage points compared to the 15.1% of respondents who held a more pessimistic view of the near future in the previous month. Meanwhile, 38.8% of manufacturing firms perceived their business outlook as remaining constant in the next six months, dropped compared to the 52.9% of respondents one month earlier. Overall, manufacturing firms hold less confidence in the near-term business outlook.
The TIER Manufacturing Composite Indicator for June 2024, adjusted for seasonal factors, underwent a corrective decline. It moved from the revised figure of 100.60 points in May to 98.45 points in June 2024, marking a drop of 2.15 points, as illustrated in Figure 1.
In addition, the TIER Service Sector Composite Indicator for June 2024 exhibited an upward trajectory. It rose from a revised value of 98.49 points in May to 99.21 points in June 2024, reflecting a slight increase of 0.72 points, as depicted in Figure 1.
Lastly, the TIER Construction Sector Composite Indicator for June 2024, adjusted for seasonal factors, also demonstrated a trend of three straight months of increase. It went up from the revised figure of 109.75 points in May to 113.04 points in June 2024, illustrating an increase of 3.29 points, as shown in Figure 1.
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 June survey and are expected to deteriorate over the next six months include:
Cutlery and Tools Manufacturing, Motorcycles Manufacturing, Motorcycles Parts Manufacturing.
Manufacturers’ sentiments that have been in decline in the June survey, but are expected to improve over the next six months include:
None.
Manufacturers’ sentiments that have been in decline in the June survey and are expected to remain sluggish over the next six months include:
Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain Husking, Textiles Mills, Yarn Spinning Mills, Fabric Mills, Industrial Chemicals, Petrochemicals Manufacturing, Man-made Fibers Manufacturing, Chemical Products Manufacturing, Petroleum and Coal Products Manufacturing, Electrical Appliances and Housewares Manufacturing.
Manufacturers surveyed who felt the June outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing.
Manufacturers surveyed who felt the June outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Food, Soft Drink Manufacturing, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Printing, Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Glass and Glass Products Manufacturing, Cement and Cement Products Manufacturing, Metal Dies, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electric Wires and Cables Manufacturing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Audio and Video Electronic Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Precision Instruments Manufacturing, Retail Sales, Telecommunication Services.
Manufacturers surveyed who felt the June outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Prepared Animal Feeds Manufacturing, Leather, Fur and Allied Product Manufacturing, Paper Manufacturing, Plastics and Rubber Raw Materials, Rubber Products Manufacturing, Plastic Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Screw, Nut Manufacturing, Motor Parts Manufacturing, Wholesale.
Manufacturers’ sentiments that have improved in the June survey and is expected to deteriorate over the next six months include:
None.
Manufacturers’ sentiments that have improved in the June survey and is expected to remain upbeat over the next six months include:
Frozen Food Manufacturing, Wood and Bamboo Products Manufacturing, Electrical Machinery, Supplies Manufacturing and Repairing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Education and Entertainment Articles Manufacturing, Basic Civil Structure Construction, Restaurants and Hotels, Banks, Insurance.
Manufacturers’ sentiments that have improved in the June survey and the trend is expected to continue for the next six months include:
Machinery and Equipment Manufacturing and Repairing, Industrial Machinery, Construction, Real Estate Investment, Securities, Transportation and Storage.
TIER Forecast (issued on 25th July, 2024.)
(NT$100 million, Chained (2016) Dollars)
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