The Taiwanese Economy in October 2020
Major countries in Europe have restarted lockdown measures to cope
with the pandemic impacts. As a result, the demands for end products
are very likely to be weakening one more time. In spite of that,
Taiwan's economic performance for the time being have been promising
compared with other Asian countries. The composite indicators of
manufacturing, services and construction issued by the Taiwan Institute
of Economic Research (TIER) signal optimism in October.
Taiwan's exports in October 2020 increased by 11.25% compared with
the same month of 2019 thanks to a strong market demand for ICT
parts and components. Regarding imports, Taiwan's imports in October
2020 decreased by 1.01% compared with imports in October of 2019.
On the cumulative basis, Taiwan's exports and imports from January
1st till October 31st of 2020 actually grew by 3.38% and -0.78%
compared with the same period of previous year. The trade surplus
during the period stood at US$ 47.77 billion or increased by 29.95%
on the year-on-year basis.
Taiwan's consumer price index (CPI) decreased by 0.24% in October
2020 compared with the same month of previous year due to the still
decreasing global crude oil and commodity prices. The CPI has been
decreasing for 9 months in a row; however, the CBC trusts that there's
no deflation for now. The core inflation rate excluding prices of
the energy and food increased by 0.53% in October 2020. In addition,
the wholesale price index (WPI) decreased by 7.37% in October 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 October 31st of 2020
drop by 0.30% and 8.25% respectively.
As for exchange rate, the NTD went further stronger due to the relatively
weaker USD as well as flowing in capital. The NTD/USD stood at 28.925
in late October 2020 indicating a 0.69% appreciation. Regarding
the interest rate, it remained low and steady in October 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 October 2020 stood at 0.079% and 0.085% respectively.
Business Outlook
The portion of manufacturing firms who perceived business were
better than expected in the target month was 29.4% or decreased
by 3.3 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 21.5% or increased
by 2.3 percentage points than 19.2% perceiving worse business of
the previous month. The portion of manufacturing firms who perceived
business remained constant in the target month was 49.1% or increased
by 1.1 percentage points compared with 48.0% perceiving constant
business in the previous month. Overall, manufacturing firms perceived
the business in the target month was constant to a certain degree
compared with the previous month.
In addition, the portion of manufacturers who perceived business
would be better in the next six months was 25.6% in the target month
or increased by 7.5 percentage points than 18.1% feeling more optimistic
about the future in the previous month. The portion of firms who
perceived the economic outlook would be worsening was 17.7% or decreased
by 3.6 percentage points compared with 21.3% 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 56.7% or decreased by 4.0 percentage points compared with
60.7% feeling neutral about the business outlook one month earlier.
Overall, manufacturing firms perceived the business in the near
future was more optimistic compared with the previous month.
The manufacturing composite indicator for October 2020 adjusted
for seasonal factors on moving average, saw an upward correction,
and from a revision of as 100.46 points in September 2020 moved
up to 101.27 points. Figure 1 shows an increase of 0.81 points,
the sixth month of consecutive increase.
The TIER service sector composite indicator for October 2020 adjusted
for seasonal factors on moving average saw a downward correlation,
and from a revision of as 97.26 points in September 2020 moved down
to 96.80 points. Figure 1 shows a decrease of 0.46 points, the first
month of decrease after six-month of consecutive increase.
In addition, the TIER Construction Sector Composite Indicator for
October 2020 adjusted for the seasonal factors on moving average
saw a slightly downward correlation, and from a revision of 111.19
points in September 2020 went down to 111.17 points. Figure 1 shows
a decrease of only 0.02 points, the first month of decrease after
a one-month 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 October
survey and are expected to deteriorate over the next six months
include:
Textiles Mills, Leather, Fur and Allied Product Manufacturing, Petroleum
and Coal Products Manufacturing, Motorcycles Parts Manufacturing.
● Manufacturers' sentiments that have been in decline in the October
survey, but are expected to improve over the next six months include:
Electrical Machinery, Supplies Manufacturing and Repairing, Wholesale,
Banks, Securities.
● Manufacturers' sentiments that have been in decline in the October
survey and are expected to remain sluggish over the next six months
include:
Frozen Food Manufacturing, Edible Oil Manufacturing, Flour Milling
and Grain Husking, Soft Drink Manufacturing, Yarn Spinning Mills,
Chemical Products Manufacturing, Rubber Products Manufacturing,
Porcelain and Ceramic Products Manufacturing, Metal Dies, Cutlery
and Tools Manufacturing, Audio and Video Electronic Products Manufacturing,
Bicycles Manufacturing, Bicycles Parts Manufacturing, Real Estate
Investment.
● 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:
Apparel, Clothing Accessories and Other Textile Product Manufacturing,
Glass and Glass Products Manufacturing, Motorcycles Manufacturing,
Restaurants and Hotels.
● 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:
Paper Manufacturing, Printing, Non-metallic Mineral Products Manufacturing,
Cement and Cement Products Manufacturing, Metal Structure and Architectural
Components Manufacturing, Electrical Machinery, Electric Wires and
Cables Manufacturing, Communications Equipment and Apparatus Manufacturing,
Electronic Parts and Components Manufacturing, Precision Instruments
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, Food, Slaughtering, Prepared Animal Feeds Manufacturing,
Fabric Mills , Wood and Bamboo Products Manufacturing, Plastic Products
Manufacturing, Fabricated Metal Products Manufacturing, Screw, Nut
Manufacturing, Machinery and Equipment Manufacturing and Repairing,
Industrial Machinery, Electrical Appliances and Housewares Manufacturing,
Electronic Machinery, Data Storage Media Units Manufacturing and
Reproducing, Transport Equipment Manufacturing and Repairing, Motor
Parts Manufacturing, Construction, Telecommunication Services, Transportation
and Storage.
● Manufacturers' sentiments that have improved in the October survey
and is expected to deteriorate over the next six months include:
None.
● Manufacturers' sentiments that have improved in the October survey
and is expected to remain upbeat over the next six months include:
Plastics and Rubber Raw Materials, Motor Vehicles Manufacturing,
Education and Entertainment Articles Manufacturing, Retail Sales,
Insurance.
● Manufacturers' sentiments that have improved in the October survey
and the trend is expected to continue for the next six months include:
Industrial Chemicals, Petrochemicals Manufacturing, Man-made Fibers
Manufacturing, Iron and Steel Basic Industries, Basic Civil Structure
Construction..
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