The Taiwanese Economy in July 2020

The world demand has recovered somewhat as the United States and European economies s and imports from January 1st till June 3oth of 2020 grew by 0.52% and -0.37% compared with the same period of previous year. The trade surplus during the period stood at US$ 21.35 billion or increased by 6.59% on the year-on-year basis.
Taiwan's consumer price index (CPI) decreased by 0.76% in June 2020 compared with the same month of previous year due to the still decreasing global crude oil and commodity prices. The core inflation rate excluding prices of the energy and food increased by 0.13% in June 2020. In addition, the wholesale price index (WPI) decreased by 10.36% in June 2020 on the year-on-year basis due to the fact that commodity prices dropped continuously. On the cumulative and year-on-year basis, Taiwan's CPI and WPI from January 1st till June 30th of 2020 drop by 0.22% and 8.20% respectively.
As for exchange rate, the NTD went somewhat stronger due to the relatively weaker USD. The NTD/USD stood at 29.66 in late June 2020 indicating a 1.24% appreciation. Regarding the interest rate, it remained low and steady in June 2020 due to the continued loose monetary operations by the CBC with respect to the most recent CPI reading; the lowest and highest over-night call rate in June 2020 stood at 0.078% and 0.101% respectivelyThe world demand has continued to recover gradually since major economies have all lifted their lockdown measures; however, uncertainties may still betide because of growing confirmed infected cases especially in the US, Europe, and main emerging countries. Despite of remaining uncertainties, the recovery of global as well as domestic demands for the time being have obviously helped pick up all three composite indicators issued by the Taiwan Institute of Economic Research (TIER) once more. The manufacturing, service and construction composite indicators all went up in July simultaneously and consecutively.
Taiwan's exports in July 2020 increased by 0.36% compared with the same month of 2019 thanks to a strong market demand for ICT parts and components. Regarding imports, Taiwan's imports in July 2020 decreased by 6.78% compared with imports in July of 2019 due to the continuously dipping prices of raw materials especially crude oil. On the cumulative basis, Taiwan's exports and imports from January 1st till July 31st of 2020 grew by 0.49% and -1.34% compared with the same period of previous year. The trade surplus during the period stood at US$ 26.71 billion or increased by 13.0% on the year-on-year basis.
Taiwan's consumer price index (CPI) decreased by 0.52% in July 2020 compared with the same month of previous year due to the still decreasing global crude oil and commodity prices. The core inflation rate excluding prices of the energy and food increased by 0.14% in July 2020. In addition, the wholesale price index (WPI) decreased by 9.15% in July 2020 on the year-on-year basis due to the fact that commodity prices dropped continuously. On the cumulative and year-on-year basis, Taiwan's CPI and WPI from January 1st till July 31st of 2020 drop by 0.27% and 8.34% respectively.
As for exchange rate, the NTD went somewhat stronger due to the relatively weaker USD as well as flowing in capital. The NTD/USD stood at 29.50 in late July 2020 indicating a 0.53% appreciation. Regarding the interest rate, it remained low and steady in July 2020 due to the continued loose monetary operations by the CBC with respect to the most recent CPI reading; the lowest and highest over-night call rate in July 2020 stood at 0.079% and 0.089% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 30.02% or increased by 0.2 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 20.8% or decreased by 9.9 percentage points than 30.7% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 49.0% or increased by 10.5 percentage points compared with 38.5% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was somewhat optimistic than the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 19.2% in the target month or decreased by 4.7 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 25.3% or decreased by 1.2 percentage points compared with 26.5% 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 55.6% or increased by 6.8 percentage points compared with 48.8% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was less optimistic and more neutral compared with the previous month.
The manufacturing composite indicator for July 2020 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 90.42 points in June 2020 moved up to 96.32 points. Figure 1 shows an increase of 5.90 points, the third month of consecutive increase.
The TIER service sector composite indicator for July 2020 adjusted for seasonal factors on moving average also saw an upward correlation, and from a revision of as 91.90 points in June 2020 moved up to 95.14 points. Figure 1 shows an increase of 3.24 points, the fourth month of consecutive increase.
In addition, the TIER Construction Sector Composite Indicator for July 2020 adjusted for the seasonal factors on moving average saw an upward correlation as well, and from a revision of 99.53 points in June 2020 went up to 108.43 points. Figure 1 shows an increase of 8.90 points, the third month of consecutive increase.

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