The Taiwanese Economy in August 2020

The COVID-19 did cause severe impacts on major economies, such as the US and Europe. However, the second quarter of these advanced economies were actually not as bad as they were projected earlier. For example: The US Bureau of Economic Analysis adjusted its estimation of second quarter GDP growth rate upward by 0.4 percentage points. In addition, the Eurostat also upward revised its GDP growth predictions for both the EU 27 and EA19 for the second quarter by 0.2 and 0.3 percentage points respectively. Despite of remaining uncertainties, the domestic demands for the time being have obviously helped pick up manufacturing as well as service composite indicators issued by the Taiwan Institute of Economic Research (TIER) over again.
Taiwan's exports in August 2020 increased by 8.32% compared with the same month of 2019 thanks to a strong market demand for ICT parts and components. Regarding imports, Taiwan's imports in August 2020 increased by 23.9% compared with imports in August of 2019 due to the expansion of major semiconductor companies. On the cumulative basis, Taiwan's exports and imports from January 1st till August 31st of 2020 actually grew by 1.54% and -0.12% compared with the same period of previous year. The trade surplus during the period stood at US$ 33.18 billion or increased by 11.89% on the year-on-year basis.
Taiwan's consumer price index (CPI) decreased by 0.33% in August 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 7 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 0.31% in August 2020. In addition, the wholesale price index (WPI) decreased by 9.09% in August 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 August 31st of 2020 drop by 0.27% and 8.43% respectively.
As for exchange rate, the NTD went somewhat weaker due to the relatively stronger USD as well as flowing out capital. The NTD/USD stood at 29.53 in late August 2020 indicating a 0.08% depreciation. Regarding the interest rate, it remained low and steady in August 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 August 2020 stood at 0.079% and 0.088% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were better than expected in the target month was 35.3% or increased by 6.0 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 19.0% or decreased by 1.5 percentage points than 20.5% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 45.7% or decreased by 4.5 percentage points compared with 50.2% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was somewhat more optimistic than the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 27.7% in the target month or increased by 7.6 percentage points than 20.1% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 23.8% or decreased by 0.8 percentage points compared with 24.6% 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 48.5% or decreased by 6.8 percentage points compared with 55.3% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was also more optimistic compared with the previous month.
The manufacturing composite indicator for August 2020 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 96.39 points in July 2020 moved up to 98.83 points. Figure 1 shows an increase of 2.44 points, the fourth month of consecutive increase.
The TIER service sector composite indicator for August 2020 adjusted for seasonal factors on moving average also saw an upward correlation, and from a revision of as 94.97 points in July 2020 moved up to 96.21 points. Figure 1 shows an increase of 1.24 points, the fifth month of consecutive increase.
In addition, the TIER Construction Sector Composite Indicator for August 2020 adjusted for the seasonal factors on moving average saw a downward correlation, and from a revision of 107.66 points in July 2020 went down to 106.98 points. Figure 1 shows a decrease of 0.68 points, the first month drop after three months 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 August survey and are expected to deteriorate over the next six months include:
Cutlery and Tools Manufacturing, Insurance.
　
● Manufacturers' sentiments that have been in decline in the August survey, but are expected to improve over the next six months include:
Motor Vehicles Manufacturing, Real Estate Investment.
　
● Manufacturers' sentiments that have been in decline in the August survey and are expected to remain sluggish over the next six months include:
Leather, Fur and Allied Product Manufacturing, Chemical Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Electrical Appliances and Housewares Manufacturing, Bicycles Manufacturing, Banks, Securities.
　
● Manufacturers surveyed who felt the August outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Petrochemicals Manufacturing, Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing, Screw, Nut Manufacturing, Electrical Machinery, Supplies Manufacturing and Repairing.
　
● Manufacturers surveyed who felt the August outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Frozen Food Manufacturing, Wood and Bamboo Products Manufacturing, Plastics and Rubber Raw Materials, Cement and Cement Products Manufacturing, Metal Structure and Architectural Components Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Parts Manufacturing, Bicycles Parts Manufacturing, Education and Entertainment Articles Manufacturing, Construction, Basic Civil Structure Construction.
　
● Manufacturers surveyed who felt the August outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Food, Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain Husking , Prepared Animal Feeds Manufacturing, Yarn Spinning Mills, Fabric Mills , Paper Manufacturing, Industrial Chemicals, Plastic Products Manufacturing, Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Industrial Machinery, Electrical Machinery, Electric Wires and Cables Manufacturing, Electronic Machinery, Data Storage Media Units Manufacturing and Reproducing, Wholesale, Telecommunication Services, Transportation and Storage.
　
● Manufacturers' sentiments that have improved in the August survey and is expected to deteriorate over the next six months include:
Glass and Glass Products Manufacturing, Restaurants and Hotels.
　
● Manufacturers' sentiments that have improved in the August survey and is expected to remain upbeat over the next six months include:
Printing, Communications Equipment and Apparatus Manufacturing, Motorcycles Manufacturing, Motorcycles Parts Manufacturing, Precision Instruments Manufacturing.
　
● Manufacturers' sentiments that have improved in the August survey and the trend is expected to continue for the next six months include:
Soft Drink Manufacturing , Textiles Mills, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Man-made Fibers Manufacturing, Audio and Video Electronic Products Manufacturing, Electronic Parts and Components Manufacturing, Retail Sales.