The Taiwanese Economy in July 2021
The spread of Delta virus variant seems inevitable, and the new form of pandemic could as an unwanted result hinder the global economic recovery, as confirmed cases have been in a rise almost everywhere. In response, Asia Pacific Economic Cooperation (APEC) member economies have recently developed a comprehensive 10-year strategy in a bid to support the region's routine vaccination effort and enhance the resilience and sustainability of immunization programs in the region through 2030. Despite that, the economic conditions in the near term are still very uncertain. Nevertheless, the market demand for end products, namely the US and European markets, nowadays remain strong because of lockdown lifting. The Taiwan Institute of Economic Research (TIER) issued its business composite indicators in July. Both the manufacturing sector and service sector composite indicators declined; however, the construction sector composite indicator increased for the first time after months of weakening.
Taiwan's exports in July 2021 increased by 34.66% compared with the same month of 2020, the consecutive five-month in double digit growth, thanks to a strong market demand for ICT parts and components and other merchandises in addition to much lower base effect due to the COVID-19 impacts. Regarding imports, Taiwan's imports in July 2021 increased by 41.01% compared with imports in July of 2020, also the consecutive five-month in double digit growth; lower base effect would also be the main cause. On the cumulative basis, Taiwan's exports and imports from January 1st till the end of July in 2021 gave a trade surplus as at US$ 37.74 billion or increase by 38.32% y-o-y.
Taiwan's consumer price index (CPI) increased by 1.95% in July 2021 compared with the same month of previous year, due to the fact that the low base effect has waned. The core inflation rate excluding prices of the energy and food increased by 1.29% in July 2021. In addition, the wholesale price index (WPI) increased by 11.77% in July 2021 on the year-on-year basis, the consecutive four-month in double digit growth. The pressure of surging input costs is still mounting.
As for exchange rate, the NTD went weaker due to the relatively stronger USD, as the market has been skeptical regarding when the Fed is tightening its loose operations to cope with the potential inflation pressure. The NTD/USD stood at 27.97 in late July 2021, indicating a 0.34% depreciation. Regarding the interest rate, it still remained low and steady in July 2021 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 2021 stood at 0.080% and 0.092% respectively.
Business Outlook
The portion of manufacturing firms who perceived business were better than expected in the target month was 27.7% or decreased by 4.1 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 22.1% or increased by 3.7 percentage points than 18.4% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 50.2% or increased by 0.4 percentage points compared with 49.8% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was somewhat a little bit more pessimistic compared with the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 31.7% in the target month or decreased by 4.5 percentage points than 36.2% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 13.4% or decreased by 2.0 percentage points compared with 15.4% 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 54.9% or increased by 6.5 percentage points compared with 48.4% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was as a result somewhat more pessimistic compared with the previous month.
The manufacturing composite indicator for July 2021 adjusted for seasonal factors on moving average, saw a mild downward correction, and from a revision of as 103.82 points in June 2021 moved down somewhat to 103.35 points in July 2021. Figure 1 shows a slight decrease of 0.47 points.
The TIER service sector composite indicator for July 2021 adjusted for seasonal factors on moving average also saw a downward correlation, and from a revision of as 92.71 points in June 2021 moved down to 91.37 points. Figure 1 shows a decrease of 1.34 points, the fourth month of consecutive decrease due to the Three-level Alert measure.
In addition, the TIER Construction Sector Composite Indicator for July 2021 adjusted for the seasonal factors on moving average saw an upward correlation, and from a revision of 101.28 points in June 2021 went up to 103.02 points in July 2021. Figure 1 shows an increase of 1.74 points, the first month of increase after four-month of consecutive decrease.
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:
None.
● Manufacturers' sentiments that have been in decline in the July survey, but are expected to improve over the next six months include:
Printing, Communications Equipment and Apparatus Manufacturing.
● Manufacturers' sentiments that have been in decline in the July survey and are expected to remain sluggish over the next six months include:
Motor Vehicles Manufacturing, Insurance.
● 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:
Motorcycles Manufacturing, Restaurants and Hotels, Securities.
● 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:
Glass and Glass Products Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electric Wires and Cables Manufacturing, Electronic Machinery, Audio and Video Electronic Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Construction, Basic Civil Structure Construction, Real Estate Investment, Telecommunication Services.
● 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, Soft Drink Manufacturing , Textiles Mills, Yarn Spinning Mills, Fabric Mills , Apparel, Clothing Accessories and Other Textile Product Manufacturing, Leather, Fur and Allied Product Manufacturing, Wood and Bamboo Products Manufacturing, Paper Manufacturing, Industrial Chemicals, Plastics and Rubber Raw Materials, Man-made Fibers Manufacturing, Chemical Products Manufacturing, Rubber Products Manufacturing, Plastic Products Manufacturing, Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Cement and Cement Products Manufacturing, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Electrical Appliances and Housewares Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Parts Manufacturing, Motorcycles Parts Manufacturing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Retail Sales.
● Manufacturers' sentiments that have improved in the July survey and is expected to deteriorate over the next six months include:
None.
● Manufacturers' sentiments that have improved in the July survey and is expected to remain upbeat over the next six months include:
Frozen Food Manufacturing, Iron and Steel Basic Industries, Metal Structure and Architectural Components Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Electronic Parts and Components Manufacturing, Precision Instruments Manufacturing, Education and Entertainment Articles Manufacturing, Banks.
● Manufacturers' sentiments that have improved in the July survey and the trend is expected to continue for the next six months include:
Food, Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain Husking , Prepared Animal Feeds Manufacturing, Petrochemicals Manufacturing, Petroleum and Coal Products Manufacturing, Wholesale, Transportation and Storage.
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