The Taiwanese Economy in September 2020

The new and confirmed cases of COVID-19 continue to increase in Europe, which has been recognized as one of the biggest uncertainties hindering the recovery of global economy. In spite of that, Taiwan's economic performance for the time being have been promising compared with other Asian countries. The composite indicators of manufacturing, services and construction issued by the Taiwan Institute of Economic Research (TIER) all increased in September.
Taiwan's exports in September 2020 increased by 9.36% compared with the same month of 2019 thanks to a strong market demand for ICT parts and components. Regarding imports, Taiwan's imports in September 2020 decreased by 5.44% compared with imports in September of 2019. On the cumulative basis, Taiwan's exports and imports from January 1st till September 30st of 2020 actually grew by 2.44% and -0.76% compared with the same period of previous year. The trade surplus during the period stood at US$ 40.31 billion or increased by 22.87% on the year-on-year basis.
Taiwan's consumer price index (CPI) decreased by 0.58% in September 2020 compared with the same month of previous year due to the still decreasing global crude oil and commodity prices. The CPI has been decreasing for 8 months in a row; however, the CBC trusts that there's no deflation for now. The core inflation rate excluding prices of the energy and food increased by 0.25% in September 2020. In addition, the wholesale price index (WPI) decreased by 8.12% in September 2020 on the year-on-year basis due to the fact that commodity prices dropped continuously. On the cumulative and year-on-year basis, Taiwan's CPI and WPI from January 1st till September 30st of 2020 drop by 0.30% and 8.34% respectively.
As for exchange rate, the NTD went further stronger due to the relatively weaker USD as well as flowing in capital. The NTD/USD stood at 29.126 in late September 2020 indicating a 1.35% appreciation. Regarding the interest rate, it remained low and steady in September 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 September 2020 stood at 0.078% and 0.112% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 31.2% or decreased by 5.4 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 20.1% or increased by 1.3 percentage points than 18.8% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 48.7% or increased by 4.1 percentage points compared with 44.6% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was somewhat stable compared with the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 15.1% in the target month or decreased by 12.2 percentage points than 27.3% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 22.1% or decreased by 1.8 percentage points compared with 23.9% 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 62.8% or increased by 14.1 percentage points compared with 48.7% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also very stable compared with the previous month.
The manufacturing composite indicator for September 2020 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 98.9 points in August 2020 moved up to 99.96 points. Figure 1 shows an increase of 1.06 points, the fifth month of consecutive increase.
The TIER service sector composite indicator for September 2020 adjusted for seasonal factors on moving average also saw an upward correlation, and from a revision of as 96.6 points in August 2020 moved up to 97.13 points. Figure 1 shows an increase of 0.53 points, the sixth month of consecutive increase.
In addition, the TIER Construction Sector Composite Indicator for September 2020 adjusted for the seasonal factors on moving average saw an upward correlation, and from a revision of 107.05 points in August 2020 went up to 111.19 points. Figure 1 shows an increase of 4.14 points, the first month increase after a one-month decline.

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