The Taiwanese Economy in November 2023

Observing the recent international economic situation, as inflationary pressures ease, the US Federal Reserve (Fed) and the European Central Bank (ECB) continue to maintain unchanged interest rates. While Japan's manufacturing sector continues to experience a prolonged downturn, its service industry however maintains an expansionary trend. In November, China saw an increase in the year-on-year growth rates of industrial and consumer goods sales compared to the previous month, indicating a mild recovery in China’s industrial and commercial activities, though real estate-related indicators in China continue to deteriorate.
In Taiwan’s manufacturing sector, despite the global manufacturing industry’s recovery momentum being insufficient, the demand for information technology and audiovisual products remains robust, benefiting from a relatively low comparison base period. This has led to a positive growth in Taiwan’s November export and external order year-on-year rates. However, uncertainties persist in the economic outlooks of the two major economies, the US and China, and tensions are escalating in the Middle East. Consequently, although the perception of the current month’s economic conditions in Taiwan’s manufacturing sector has improved slightly compared to the previous month’s survey, the outlook for the next six months remains conservative.
Taiwan’s service industry, buoyed by the impressive performance of the Taiwan stock market in November, along with rising shipping prices and sustained strong demand for air passenger transportation, has seen continued growth in the number of inbound tourists, driving up demand for food and accommodation. This positive trend has led securities, transportation and warehousing, and the hospitality industry to have optimistic views on the economic performance for the current month.
In the construction sector, as the season enters the traditional peak period for rush construction and home buying towards the end of the year, the industry’s perception of the current month and the next six months has significantly improved compared to the previous month’s survey.
According to the survey results from the Taiwan Institute of Economic Research (TIER), after model calculations, the Manufacturing Composite Indicator for November continues to decline, though the magnitude of the decline is limited. In contrast, both the Service Sector Composite Indicator and the Construction Sector Composite Indicator have turned upward.
In terms of foreign trade, Taiwan’s year-on-year export growth rate in November turned positive once again, expanding from -4.5% in October to 3.8% in November. Among the major export products, information technology and audiovisual products exhibited the highest growth at 74.0% in November. On the import side, there was a broadening decrease in the year-on-year import rates for agricultural and industrial raw materials as well as consumer goods. Additionally, the year-on-year decline in the purchase of capital equipment remained significant, leading to an overall import contraction of -14.8% in November. Cumulatively for the period from January to November 2023, exports declined by 11.5% compared to the same period last year, while imports saw a larger decline of 18.7%. The overall trade surplus for January to November 2023 amounted to US$ 69.46 billion, reflecting a growth of 49.6%.
In terms of prices, due to the impact of consecutive typhoons bringing heavy rain, the overall year-on-year food price inflation rate increased from 5.51% in October to 5.63% in November. However, the cost of oil declined in line with international trends, and with a decrease in communication equipment and transportation costs, the year-on-year inflation rate for transportation and communication expenses narrowed from 1.64% in October to 1.18% in November. As a result, Taiwan’s overall Consumer Price Index (CPI) decreased from 3.05% in the previous month to 2.90% in November.
Regarding the Producer Price Index (PPI), the price of natural gas fell due to adjustments made by the oil company for gas supplied to the electricity industry, leading to a broadened year-on-year decline in the overall PPI in November, reaching -0.70%. The cumulative year-on-year CPI inflation rate for the period from January to November 2023 was 2.48%, while the PPI recorded a year-on-year decline of -0.56%.
In the domestic financial market, due to stable market liquidity, the overnight interbank lending rates in November 2023 ranged from a high of 0.692% to a low of 0.686%. The weighted average interest rate was 0.688%, representing a 0.003 percentage point decrease compared to the previous month and a 0.255 percentage point increase from the same month in 2022. Turning to the Taiwanese stock market, market expectations of the US Fed refraining from raising interest rates led to fluctuations in the yield of the U.S. 10-year treasury bonds, and a robust performance in the U.S. stock market triggered a rebound in the Taiwan Stock Exchange. The Taiwan Weighted Index closed at 17,433.85 points at the end of November, surging by 8.95%, with an average daily trading volume of NT$ 2,884.33 billion.
In the currency market, influenced by the weakening U.S. dollar, the continued stabilization of the Chinese yuan exchange rate, and a net foreign capital inflow of US$ 11.257 billion in November, marking the highest monthly inflow since 2011, the NT Dollar strengthened. At the end of the month, the exchange rate stood at 31.26 against the U.S. dollar, reflecting an appreciation of 3.71%.

Business Survey Outcomes

The proportion of manufacturing firms that perceived their business as better than expected in the target month was 15.2%, an increase of 0.4 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 29.1%, a decrease of 4.2 percentage points compared to the 33.3% 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 55.7%, which increased by 3.8 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 somewhat pessimistic 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 25.0%, representing a decrease of 2.1 percentage points compared to the 27.1% 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 26.8%, marking an increase of 6.9 percentage points compared to the 19.9% of respondents who held a more pessimistic view of the near future in the previous month. Meanwhile, 48.3% of manufacturing firms perceived their business outlook as remaining constant in the next six months, showing a decrease of 4.7 percentage point compared to the 53.0% of respondents who maintained a neutral stance on the business outlook one month earlier. Overall, manufacturing firms appeared to hold a slightly more neutral view of the business outlook in the near future.
However, when considering a moving average, the Manufacturing Composite Indicator for November 2023, adjusted for seasonal factors, underwent a corrective downturn. It declined from the revised figure of 93.77 points in October 2023 to 93.20 points in November 2023, marking a subtle decrease of 0.57 points, as illustrated in Figure 1.
In contrast, the TIER Service Sector Composite Indicator for November 2023, analyzed as a moving average, exhibited an upward trajectory. It rose from a revised value of 91.17 points in October 2023 to 92.54 points in November 2023, reflecting an increase of 1.37 points, as depicted in Figure 1.
Furthermore, the TIER Construction Sector Composite Indicator for November 2023, adjusted for seasonal factors and observed as a moving average, demonstrated an ascending trend. It climbed from the revised figure of 99.40 points in October 2023 to 102.82 points in November 2023, illustrating a notable increase of 3.42 points, as shown in Figure 1.
Considering the factors outlined above, TIER’s composite indicators offer insights into the resilience of Taiwan’s economy.

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 November survey and are expected to deteriorate over the next six months include:
Petrochemicals Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Motorcycles Parts Manufacturing, Wholesale.

Manufacturers’ sentiments that have been in decline in the November survey, but are expected to improve over the next six months include:
Audio and Video Electronic Products Manufacturing.

Manufacturers’ sentiments that have been in decline in the November survey and are expected to remain sluggish over the next six months include:
Soft Drink Manufacturing, Petroleum and Coal Products Manufacturing, Bicycles Manufacturing, Bicycles Parts Manufacturing.

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:
Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Motorcycles 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, Frozen Food Manufacturing, Textiles Mills, Yarn Spinning Mills, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Wood and Bamboo Products Manufacturing, Printing, Glass and Glass Products Manufacturing, Electric Wires and Cables Manufacturing, Communications Equipment and Apparatus Manufacturing, Education and Entertainment Articles Manufacturing, Retail Sales, Banks, Insurance.

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, Slaughtering, Prepared Animal Feeds Manufacturing, Paper Manufacturing, Industrial Chemicals, Plastics and Rubber Raw Materials, Man-made Fibers Manufacturing, Chemical Products Manufacturing, Rubber 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 Appliances and Housewares Manufacturing, Electronic Machinery, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Motor Parts Manufacturing, Precision Instruments Manufacturing.

Manufacturers’ sentiments that have improved in the November survey and is expected to deteriorate over the next six months include:
None.

Manufacturers’ sentiments that have improved in the November survey and is expected to remain upbeat over the next six months include:
Edible Oil Manufacturing, Flour Milling and Grain Husking, Fabric Mills, Leather, Fur and Allied Product Manufacturing, Metal Structure and Architectural Components Manufacturing, Construction, Basic Civil Structure Construction, Restaurants and Hotels, Securities, Telecommunication Services.

Manufacturers’ sentiments that have improved in the November survey and the trend is expected to continue for the next six months include:
Plastic Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Electrical Machinery, Supplies Manufacturing and Repairing, Real Estate Investment, Transportation and Storage.