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The Taiwanese Economy in June 2021
Despite variant viruses continue to cause impacts on many countries, the global demand has been rebounding because of increasing vaccination rate worldwide, especially advanced countries, the major market demand of end products. Therefore, Mr. Morris Chang urged APEC members with large vaccine production capabilities to help countries in the Asia-Pacific region meet urgent vaccine needs in this year's Asia Pacific Economic Cooperation (APEC) forum on July 16th. Nevertheless, international forecasting agencies such as IHS Markit and EIU have continued to adjust their forecasts for the world GDP growth upward. In response to the most recent COVID-19 outbreak, Taiwan has adopted a Three-level Alert measure since May 15th, whereas the measure could have impacted on domestic services. However, Taiwan's most trustworthy economic engine, exports in goods, has remained strong and robust. Accordingly, the Taiwan Institute of Economic Research (TIER) issue its most recent GDP forecast on July 23rd predicting that Taiwan's annual economic growth rate at 5.40% in 2021.
Taiwan's exports in June 2021 increased by 35.14% compared with the same month of 2020, the consecutive four-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 June 2021 increased by 42.35% compared with imports in June of 2020, also the consecutive four-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 June in 2021 gave a trade surplus as at US$ 31.83 billion or increase by 45.82% y-o-y.
Taiwan's consumer price index (CPI) increased by 1.89% in June 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 1.36% in June 2021. In addition, the wholesale price index (WPI) increased by 10.74% in June 2021 on the year-on-year basis, the consecutive three-month in double digit growth. The pressure of surging input costs is 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 27.87 in late June 2021, indicating a 0.77% depreciation. Regarding the interest rate, it still remained low and steady in June 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 June 2021 stood at 0.080% and 0.087% respectively.
Business Outlook
The portion of manufacturing firms who perceived business were better than expected in the target month was 32.1% or increased by 0.9 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 18.3% or decreased by 3.7 percentage points than 22.0% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 49.6% or increased by 2.8 percentage points compared with 46.8% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was somewhat a little bit more optimistic compared with the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 36.0% in the target month or decreased by 0.4 percentage points than 36.4% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 16.0% or increased by 3.9 percentage points compared with 12.1% 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 47.9% or decreased by 3.5 percentage points compared with 51.4% 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 June 2021 adjusted for seasonal factors on moving average, saw a mild downward correction, and from a revision of as 104.98 points in May 2021 moved down somewhat to 103.79 points in June 2021. Figure 1 shows a slight decrease of 1.19 points.
The TIER service sector composite indicator for June 2021 adjusted for seasonal factors on moving average also saw a downward correlation, and from a revision of as 97.36 points in May 2021 moved down to 91.90 points. Figure 1 shows a decrease of 5.46 points, the third month of consecutive decrease due to the Three-level Alert measure.
In addition, the TIER Construction Sector Composite Indicator for June 2021 adjusted for the seasonal factors on moving average saw a downward correlation as well, and from a revision of 103.08 points in May 2021 went down to 101.34 points in June 2021. Figure 1 shows a decrease of 1.74 points, the fourth 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 June survey and are expected to deteriorate over the next six months include:
Motor Vehicles Manufacturing, Motorcycles Manufacturing, Retail Sales, Restaurants and Hotels.
● Manufacturers' sentiments that have been in decline in the June survey, but are expected to improve over the next six months include:
Printing.
● Manufacturers' sentiments that have been in decline in the June survey and are expected to remain sluggish over the next six months include:
Edible Oil Manufacturing, Flour Milling and Grain Husking, Petrochemicals Manufacturing, Petroleum and Coal Products Manufacturing, Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Cement and Cement Products Manufacturing, Transport Equipment Manufacturing and Repairing.
● Manufacturers surveyed who felt the June outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Motor Parts Manufacturing.
● Manufacturers surveyed who felt the June outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Frozen Food Manufacturing, Prepared Animal Feeds Manufacturing, Glass and Glass Products Manufacturing, Iron and Steel Basic Industries, Metal Structure and Architectural Components Manufacturing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Bicycles Manufacturing, Telecommunication Services.
● Manufacturers surveyed who felt the June outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Food, Slaughtering, Soft Drink Manufacturing , Textiles Mills, Yarn Spinning Mills, Fabric Mills , Wood and Bamboo Products Manufacturing, Industrial Chemicals, Plastics and Rubber Raw Materials, Man-made Fibers Manufacturing, Chemical Products Manufacturing, Rubber Products Manufacturing, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Electrical Appliances and Housewares Manufacturing, Construction, Basic Civil Structure Construction, Real Estate Investment, Transportation and Storage.
● Manufacturers' sentiments that have improved in the June survey and is expected to deteriorate over the next six months include:
Motorcycles Parts Manufacturing.
● Manufacturers' sentiments that have improved in the June survey and is expected to remain upbeat over the next six months include:
Apparel, Clothing Accessories and Other Textile Product Manufacturing, Leather, Fur and Allied Product Manufacturing, Paper Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electric Wires and Cables Manufacturing, Audio and Video Electronic Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Bicycles Parts Manufacturing, Precision Instruments Manufacturing, Education and Entertainment Articles Manufacturing, Wholesale, Banks, Insurance.
● Manufacturers' sentiments that have improved in the June survey and the trend is expected to continue for the next six months include:
Plastic Products Manufacturing, Securities.
TIER Forecast (issued on 23rd April, 2021.)
(NT$100 million, Chained (2016) Dollars)
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