The Taiwanese Economy in April 2022

The turmoil and possible disruptions in global supply chains are taking place for the time being. The supply chains chaos did cause the commodity prices to soar unceasingly due to two main reasons. The first one would be the ongoing Russia-Ukraine war, as both Russia and Ukraine are important countries of producing and exporting raw commodities. The war has had hampering the processes and fueling worldwide inflation. The second one would be China's “zero COVID measures” that have forced the “world factory” to shut down and prop up the inflation further in short supply. In response, major central banks in the world especially the US federal reserve (Fed) began to tighten their monetary operations, which could add more uncertainties to the markets. As a result, the manufacturing and construction composite indicators issued by the Taiwan Institute of Economic Research (TIER) both declined in April 2022; however, the service composite indicator went up slightly.
Taiwan's economic performance in external markets has so far still remained rather good. Taiwan's exports in April 2022 increased significantly by 18.79% compared with the same month of 2021, the consecutive fourteen-month in double digit growth, as a result of a strong market demand for Taiwan's ICT parts and components and other quality merchandises. Regarding imports, Taiwan's imports in April 2022 increased by 26.73% compared with imports in April of 2021, also the consecutive fourteen-month in double digit growth. Taiwan's exports and imports from January till the end of April 2022 gave a trade surplus as at US$ 20.66 billion or increase by 2.54% year-on-year due to solid performance in external markets as well as the base effect.
Taiwan's consumer price index (CPI) increased by 3.38% in April 2022 compared with the same month of previous year, which would be 0.16 percentage points higher than the inflation rate of previous month. The core inflation rate excluding prices of the energy and food increased by 2.53% in April 2022, which would be 0.06 percentage points higher than the core inflation rate in March 2022. In addition, the wholesale price index (WPI) increased by 15.07% in April 2022 on the year-on-year basis, the consecutive thirteen-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 soon. With respect to the ongoing Russia-Ukraine war as well as China's lockdown policy and its influence on regional supply chains, the inflationary pressure is likely to go on for a while.
As for exchange rate, the NTD went weaker due to the relatively stronger USD in April 2022. As the US Federal Reserve's upcoming policy is expected to be even more hawkish in order to cope with the inflation rate standing at 8.3% in April 2022. The NTD/USD stood at 29.48 in late April 2022, indicating a 3.0% depreciation. The Taiwan central bank (CBC) raised its key interest rates by 0.25 percentage points on 17th March 2022. And it is expected to further rate-hike later. Regarding the over-night call rate; the lowest and highest rate in April 2022 stood at 0.18% and 0.227% respectively.

Business Survey Outcomes

The portion of manufacturing firms who perceived business were better than expected in the target month was 23.2% or decreased by 15.2 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 36.7% or increased by 22.0 percentage points than 14.7% of respondents perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 40.1% or decreased by 6.8 percentage points than the ratio of previous month's respondents perceiving constant business. Overall, manufacturing firms perceived the business in the target month was rather pessimistic about the business conditions compared with the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 25.5% in the target month or decreased by 2.4 percentage points than 27.9% of respondents feeling more optimistic about the near future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 21.8% or increased by 7.1 percentage points compared with 14.7% of respondents feeling rather pessimistic about the near future in the previous month. The portion of manufacturing firms who perceived business remained constant in the next six months stood at 52.7% or decreased by 4.7 percentage points compared with 57.4% of respondents feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was as a result still somewhat pessimistic compared with the previous month.
As a result, the manufacturing composite indicator for April 2022 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 99.10 points in March moved down to 94.61 points in April 2022. Figure 1 shows a decrease of 4.49 points, a four-month of consecutive decrease.
Moreover, the TIER service sector composite indicator for April 2022 adjusted for seasonal factors on moving average saw an upward correlation, and from a revision of as 95.28 points in March moved up to 95.49 points in April 2022. Figure 1 shows an increase of 0.21 points, a two-month of consecutive increase.
Last but not the least, the TIER construction sector composite Indicator for April 2022 adjusted for the seasonal factors on moving average saw a downward correlation, and from a revision of 103.95 points in March went down to 96.10 points in April 2022. Figure 1 shows a decrease of 7.85 points, a three-month of consecutive decrease.

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 April survey and are expected to deteriorate over the next six months include:
Textiles Mills, Man-made Fibers Manufacturing, Cutlery and Tools Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Motorcycles Manufacturing.

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