|
The Taiwanese Economy in December 2023
Observing recent international economic trends, despite a continued contraction in the manufacturing sectors of the US and Europe, there has been a slight improvement. Japan’s manufacturing industry has declined due to reduced global demand, but its service sector has seen modest growth as a result of expanding new business ventures. While China is still hindered by a sluggish real estate market, signs of slow recovery are emerging in its industrial and commercial activities.
In Taiwan’s manufacturing sector, the lively opportunities presented by emerging technological applications, gradual destocking of supply chain inventory driving demand, and a relatively low comparison base have boosted Taiwan’s export growth rate in December 2023. Additionally, some traditional industries in Taiwan have shown improved export orders and production performance compared to the previous month, leading to a noticeably more positive outlook on the manufacturing sector for the current month and the next six months.
Taiwan’s service industry has benefited from the holiday season, including Christmas and New Year festivities, corporate year-end banquets, increased year-end holiday flight traffic, and a subsequent boost in demand for dining and accommodation. Retail and hospitality industries are optimistic about the economic performance for the current month.
In the construction industry, the year-end rush for construction projects and the peak season for home purchases, coupled with the government’s support for the “Youth Secure Home 2.0 policy”, have sustained continued strong demand. Considering the ongoing increase in the government's public construction budget for 2024 and a positive outlook for the housing market in the next six months, domestic construction industry players are optimistic about the economic performance for the current month and the next six months.
Based on the survey findings released by the Taiwan Institute of Economic Research (TIER) and subsequent model calculations, the Manufacturing Composite Indicator, the Service Sector Composite Indicator, and the Construction Sector Composite Indicator for December 2023 have all exhibited growth, indicating positive signs of recovery.
In terms of foreign trade, the robust demand for emerging applications such as artificial intelligence (AI) has led to a gradual improvement in the export of integrated circuits and general industrial products. Coupled with a relatively low comparison base, this has resulted in a continued positive growth trend in exports for December 2023, expanding from 3.73% in November to 11.76%. The cumulative figures for Taiwan’s exports in 2023 show a 9.79% decline compared to 2022, with imports experiencing a 17.80% decrease. The overall trade surplus for 2023 amounts to US$80.586 billion, marking a remarkable growth of 56.99%.
Regarding prices, the year-on-year Consumer Price Index (CPI) has reduced from 2.90% in November 2023 to 2.71% in December. However, different categories, such as clothing, miscellaneous items, healthcare, and education/entertainment, have experienced varying rates of increase or decrease, leading to an expansion of the core CPI from 2.39% to 2.43%. The cumulative CPI for the year 2023 is 2.50%, while the Producer Price Index (PPI) registers a year-on-year decrease of -0.56%.
In the financial markets, there is stability in market funds, with the highest and lowest overnight interbank rates in December 2023 being 0.695% and 0.682%, respectively. In the stock market, sustained foreign capital inflows and net buying of Taiwan stocks have influenced major weighted stocks, prompting the Taiwan Weighted Index to close at 17,930.81 points at the end of December, reflecting a 2.85% increase. As for the exchange rate, the Federal Reserve’s dovish stance in December weakened the international US dollar. Coupled with continued foreign investment in Taiwan stocks and currency inflows, this resulted in a continued strengthening of the NT Dollar, with the month-end exchange rate at 30.735 against the US dollar, appreciating by 1.71%.
Business Survey Outcomes
The proportion of manufacturing firms that perceived their business as better than expected in the target month was 20.9%, an increase of 7.7 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 20.2%, a decrease of 7.0 percentage points compared to the 27.2% 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 58.9%, which decreased by 0.6 percentage points compared to the ratio of respondents from the previous month who perceived their business as constant. In general, manufacturing firms seemed to express a rather optimistic to neutral stance regarding their business outlook.
Furthermore, in the target month, the segment of manufacturers who anticipated an improvement in their business over the next six months stood at 34.1%, representing an increase of 7.4 percentage points compared to the 26.7% 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 17.1%, marking a decrease of 10.7 percentage points compared to the 27.8% of respondents who held a more pessimistic view of the near future in the previous month. Meanwhile, 48.8% of manufacturing firms perceived their business outlook as remaining constant in the next six months, showing an increase of 3.3 percentage point compared to the 45.5% of respondents who maintained a neutral stance on the business outlook one month earlier. Overall, manufacturing firms appeared to hold a more optimistic view of the business outlook in the near future.
The TIER Manufacturing Composite Indicator for December 2023, adjusted for seasonal factors, underwent a corrective upturn. It increased from the revised figure of 93.24 points in November 2023 to 96.78 points in December 2023, marking an increase of 3.54 points, as illustrated in Figure 1.
In addition, the TIER Service Sector Composite Indicator for December 2023, analyzed as a moving average, exhibited an upward trajectory. It rose from a revised value of 91.82 points in November 2023 to 93.60 points in December 2023, reflecting an increase of 1.78 points, as depicted in Figure 1.
Lastly, the TIER Construction Sector Composite Indicator for December 2023, adjusted for seasonal factors and observed as a moving average, demonstrated an ascending trend. It climbed from the revised figure of 102.13 points in November 2023 to 105.91 points in December 2023, illustrating a notable increase of 3.78 points, as shown in Figure 1. Considering the factors outlined above, TIER’s composite indicators offer insights into the resilience of Taiwan’s economy for the time being.
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 December survey and are expected to deteriorate over the next six months include:
Data Storage Media Units Manufacturing and Reproducing, Motorcycles Manufacturing, Motorcycles Parts Manufacturing.
Manufacturers’ sentiments that have been in decline in the December survey, but are expected to improve over the next six months include:
Audio and Video Electronic Products Manufacturing, Banks.
Manufacturers’ sentiments that have been in decline in the December survey and are expected to remain sluggish over the next six months include:
Soft Drink Manufacturing, Prepared Animal Feeds Manufacturing, Plastics and Rubber Raw Materials, Rubber Products Manufacturing, Plastic Products Manufacturing, Screw, Nut Manufacturing, Cutlery and Tools Manufacturing, Bicycles Parts Manufacturing, Securities.
Manufacturers surveyed who felt the December outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Petrochemicals Manufacturing, Transport Equipment Manufacturing and Repairing, Wholesale.
Manufacturers surveyed who felt the December 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, Edible Oil Manufacturing, Flour Milling and Grain Husking, Leather, Fur and Allied Product Manufacturing, Wood and Bamboo Products Manufacturing, Paper Manufacturing, Printing, Metal Dies, Electric Wires and Cables Manufacturing, Communications Equipment and Apparatus Manufacturing, Education and Entertainment Articles Manufacturing, Restaurants and Hotels, Telecommunication Services.
Manufacturers surveyed who felt the December outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Slaughtering, Industrial Chemicals, Man-made Fibers Manufacturing, Petroleum and Coal Products Manufacturing, Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Glass and Glass Products Manufacturing, Cement and Cement Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Industrial Machinery, Electrical Appliances and Housewares Manufacturing, Electronic Machinery, Electronic Parts and Components Manufacturing, Motor Vehicles Manufacturing, Motor Parts Manufacturing, Bicycles Manufacturing, Precision Instruments Manufacturing, Transportation and Storage.
Manufacturers’ sentiments that have improved in the December survey and is expected to deteriorate over the next six months include:
None.
Manufacturers’ sentiments that have improved in the December survey and is expected to remain upbeat over the next six months include:
Textiles Mills, Yarn Spinning Mills, Fabric Mills, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Construction, Basic Civil Structure Construction, Insurance.
Manufacturers’ sentiments that have improved in the December survey and the trend is expected to continue for the next six months include:
Chemical Products Manufacturing, Real Estate Investment, Retail Sales.
TIER Forecast (issued on 26th January, 2024.)
(NT$100 million, Chained (2016) Dollars)
|