The Taiwanese Economy in November 2021

Major forecasting agencies all predict that the global economy in on the track to a promising recovery. However, the new variant known as Omicron has been considered as an uncertainty hindering the economic growth momentum. Despite there’s an undefined and possible constraint, Taiwan’s economic performance has been out of the woods especially lately. AS for the domestic private consumption, “retaliation style expenditures” have been boosting the service industry since the lift of third-degree alert measure. In addition, domestic investment and export engine have both remained strong and solid. With these, the manufacturing, service, and construction composite indicators issued by Taiwan Institute of Economic Research (TIER) all increased in November as a result.

Taiwan’s exports in November 2021 increased significantly by 30.18% compared with the same month of 2020, the consecutive nine-month in double digit growth, as a result of a strong market demand for ICT parts and components and other merchandises in addition to much lower base effect due to the COVID-19 impacts. Regarding imports, Taiwan’s imports in November 2021 increased by 33.84% compared with imports in November of 2020, also the consecutive nine-month in double digit growth; lower base effect would also be the main cause. On the cumulative basis, Taiwan’s exports and imports from January 1st till the end of November in 2021 gave a trade surplus as at US$ 59.51 billion or increase by 11.71% year-on-year.

Taiwan’s consumer price index (CPI) increased by 2.84% in November 2021 compared with the same month of previous year, due to the fact that the low base effect has waned, so the fear of inflation is on with hiking commodity prices. The core inflation rate excluding prices of the energy and food increased by 1.49% in November 2021. In addition, the wholesale price index (WPI) increased by 14.19% in November 2021 on the year-on-year basis, the consecutive eight-month in double digit growth. The pressure of surging input costs is still mounting meaning the producers need to transfer the cost to consumers eventually, if the imported inflation problem is not yet resolved.

As for exchange rate, the NTD went stronger due to the relatively weaker USD in November. However, the US Federal Reserve’s upcoming policy is expected to be more hawkish in order to cope with the inflation rate standing at 6.8% in November. The NTD/USD stood at 27.81 in late November 2021, indicating a 0.04% appreciation, whereas the NTD has still been one of the strongest Asian currencies so far since the first day of 2021. Regarding the interest rate, it still remained low and steady in November 2021 due to the continued loose monetary operations by the CBC with respect to the current exchange rate situation; the lowest and highest over-night call rate in November 2021 stood at 0.080% and 0.084% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 29.8% or decreased by 2.1 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 18.8% or increased by 2.1 percentage points than 16.7% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 51.4% that’s the same as the ratio of previous month’s respondents perceiving constant business. Overall, manufacturing firms perceived the business in the target month was somewhat more pessimistic compared with the previous month.

In addition, the portion of manufacturers who perceived business would be better in the next six months was 27.6% in the target month or increased by 3.7 percentage points than 23.9% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 12.2% or decreased by 2.8 percentage points compared with 15.0% 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 60.2% or decreased by 0.9 percentage points compared with 61.1% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was as a result somewhat more optimistic compared with the previous month.

The manufacturing composite indicator for November 2021 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 101.34 points in October 2021 moved up to 102.44 points in November 2021. Figure 1 shows an increase of 1.10 points, the first hike after a sixth-month of consecutive drop.

The TIER service sector composite indicator for November 2021 adjusted for seasonal factors on moving average saw an upward correlation, and from a revision of as 96.77 points in October 2021 moved up to 98.29 points. Figure 1 shows an increase of 1.52 points, the fourth month of consecutive increase.

In addition, the TIER Construction Sector Composite Indicator for November 2021 adjusted for the seasonal factors on moving average also saw an upward correlation, and from a revision of 108.85 points in October 2021 went up to 109.07 points in November 2021. Figure 1 shows a minor increase of 0.22 points, the first month increase after a one-month dip.

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 November survey and are expected to deteriorate over the next six months include:
Motor Vehicles Manufacturing, Motorcycles Manufacturing.
● Manufacturers’ sentiments that have been in decline in the November survey, but are expected to improve over the next six months include:
None.
　
● Manufacturers’ sentiments that have been in decline in the November survey and are expected to remain sluggish over the next six months include:
None.
　
● Manufacturers surveyed who felt the November outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Petrochemicals Manufacturing, Man-made Fibers Manufacturing.
　
● Manufacturers surveyed who felt the November 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 , Wood and Bamboo Products Manufacturing, Petroleum and Coal Products Manufacturing, Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Audio and Video Electronic Products Manufacturing, Precision Instruments Manufacturing.
　
● Manufacturers surveyed who felt the November 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, Leather, Fur and Allied Product Manufacturing, Industrial Chemicals, Plastics and Rubber Raw Materials, Rubber Products Manufacturing, Plastic Products Manufacturing, Glass and Glass Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Electric Wires and Cables Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Parts Manufacturing, Retail Sales, Banks, Insurance.
　
● Manufacturers’ sentiments that have improved in the November survey and is expected to deteriorate over the next six months include:
Yarn Spinning Mills.
　
● Manufacturers’ sentiments that have improved in the November survey and is expected to remain upbeat over the next six months include:
Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain Husking , Apparel, Clothing Accessories and Other Textile Product Manufacturing, Paper Manufacturing, Printing, Porcelain and Ceramic Products Manufacturing, Metal Structure and Architectural Components Manufacturing, Cutlery and Tools Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Wholesale, Telecommunication Services.
　
● Manufacturers’ sentiments that have improved in the November survey and the trend is expected to continue for the next six months include:
Prepared Animal Feeds Manufacturing, Textiles Mills, Fabric Mills , Chemical Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Industrial Machinery, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electrical Appliances and Housewares Manufacturing, Motorcycles Parts Manufacturing, Education and Entertainment Articles Manufacturing, Construction, Basic Civil Structure Construction, Real Estate Investment, Restaurants and Hotels, Securities, Transportation and Storage.