The Taiwanese Economy in October 2022

Observing the recent international economic situation, the leading indicators of major economies and the manufacturing purchasing managers’ index (PMI) continued to decline in October 2022, and according to the economic outlook report of the OECD, due to the energy shocks have continued to fuel inflation, and the global economy would inevitably slow further next year. In the year of 2023, the global economic growth will mainly be contributed by major Asian emerging market economies, such as India and Vietnam, while the United States and European economy will be likely to decelerate sharply. As the market demand for end products is expected to be weakening, Taiwan’s exports in goods will probably not be able to immune from the demand shocks. In fact, Taiwan’s economic performance in external markets has been slowing down, and the export orders have been weakening. Taiwan’s exports in October 2022 decreased by 0.46% compared with the same month of 2021. Regarding imports, Taiwan’s imports in October 2022 increased by 8.22% compared with imports in October of 2021. Taiwan’s exports and imports from January till the end of October 2022 gave a trade surplus as at US$ 43.72 billion or decrease by 17.35% year-on-year due to more costly in imports of commodities and slowing growth in exports compared with those in 2021.
Taiwan’s consumer price index (CPI) increased by 2.72% in October 2022 compared with the same month of previous year, which would be 0.04 percentage points lower than the inflation rate of previous month. The core inflation rate excluding prices of the energy and food increased by 2.96% in October 2022, which would be 0.16 percentage points higher than the core inflation rate in September 2022. In addition, the wholesale price index (WPI) increased by 11.09% in October 2022 on the year-on-year basis, the consecutive twelve-month in double digit growth. The pressure of surging input costs is still quite serious. Therefore, some producers are transferring the costs to consumers to break even.
As for exchange rate, the NTD went weaker due to the relative trend of USD exchange rate in October 2022. As the US Federal Reserve’s monetary policy is relatively more hawkish in order to cope with the inflation. The NTD/USD stood at 32.21 in late October 2022, indicating a 1.45% depreciation. The Taiwan central bank (CBC) raised its key interest rates by 0.125 percentage points on 23rd September 2022. The attention is on CBC’s next meeting in December. Regarding the over-night call rate; the lowest and highest rate in October 2022 stood at 0.43% and 0.447% respectively.

Business Survey Outcomes

The portion of manufacturing firms who perceived business were better than expected in the target month was 10.0% or decreased by 4.6 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 35.9% or decreased by 9.1 percentage points as respondents perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 54.1% or increased by 13.7 percentage points than the ratio of previous month’s respondents perceiving constant business. Overall, manufacturing firms perceived the business in the target month was still pessimistic about the business conditions.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 15.5% in the target month or increased by 4.1 percentage points than 11.4% 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 37.7% or decreased by 7.1 percentage points compared with 44.8% 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 46.8% or increased by 3.1 percentage points compared with 43.7% 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 pessimistic.
As a result, the manufacturing composite indicator for October 2022 adjusted for seasonal factors on moving average, saw a downward correction, and from a revision of as 84.63 points in September moved down to 84.20 points in October 2022. Figure 1 shows a decrease of 0.43 points, a ten-month of consecutive decrease.
Moreover, the TIER service sector composite indicator for October 2022 on moving average also saw a downward correlation, and from a revision of as 94.74 points in September moved down to 91.09 points in October 2022. Figure 1 shows a decrease of 3.65 points, the third month of consecutive dip.
Last but not the least, the TIER construction sector composite Indicator for October 2022 adjusted for the seasonal factors on moving average saw a downward correlation as well, and from a revision of 90.34 points in September went down to 85.10 points in October 2022. Figure 1 shows a decrease of 5.24 points, the third month of consecutive dip, too.

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 October survey and are expected to deteriorate over the next six months include:
Textiles Mills, Yarn Spinning Mills, Fabric Mills, Man-made Fibers Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Construction, Basic Civil Structure Construction, Real Estate Investment, Wholesale, Insurance.

● Manufacturers’ sentiments that have been in decline in the October survey, but are expected to improve over the next six months include:
Soft Drink Manufacturing.

● Manufacturers’ sentiments that have been in decline in the October survey and are expected to remain sluggish over the next six months include:
Chemical Products Manufacturing, Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing, Plastic Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Motorcycles Manufacturing, Securities, Transportation and Storage.

● Manufacturers surveyed who felt the October outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Industrial Chemicals, Petrochemicals Manufacturing, Glass and Glass Products Manufacturing, Cutlery and Tools Manufacturing, Electrical Appliances and Housewares Manufacturing.

● Manufacturers surveyed who felt the October outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Food, Edible Oil Manufacturing, Flour Milling and Grain Husking, Printing, Motorcycles Parts Manufacturing, Bicycles Parts Manufacturing.

● Manufacturers surveyed who felt the October 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, Leather, Fur and Allied Product Manufacturing, Wood and Bamboo Products Manufacturing, Paper Manufacturing, Plastics and Rubber Raw Materials, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electric Wires and Cables Manufacturing, Electronic Machinery, Audio and Video Electronic Products Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Education and Entertainment Articles Manufacturing, Retail Sales.

● Manufacturers’ sentiments that have improved in the October survey and is expected to deteriorate over the next six months include:
Machinery and Equipment Manufacturing and Repairing, Industrial Machinery.

● Manufacturers’ sentiments that have improved in the October survey and is expected to remain upbeat over the next six months include:
Frozen Food Manufacturing, Communications Equipment and Apparatus Manufacturing, Motor Parts Manufacturing, Bicycles Manufacturing, Precision Instruments Manufacturing, Restaurants and Hotels, Banks, Telecommunication Services.

● Manufacturers’ sentiments that have improved in the October survey and the trend is expected to continue for the next six months include:
Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing.