The Taiwanese Economy in January 2024

Observing the recent international economic trends, the United States has experienced a decline in retail sales due to the impact of the cold weather in January. However, the manufacturing Purchasing Managers’ Index (PMI) continues to rise, reaching its highest value since 2023. The overall economic confidence in the Eurozone has slightly decreased. Japan has benefited from the demand for automobiles and semiconductor manufacturing equipment, resulting in a strong performance in January exports. With the upcoming Lunar New Year holiday and some industries entering the traditional slow season, the manufacturing PMI in China remains below the boom-bust line.
On the domestic front, the semiconductor supply chain inventory gradually depleting and the expansion of the AI chip market have improved the sentiment of the electronic machinery industry for the current month and the next six months compared to the previous month's survey. For the traditional industries, the consumption momentum of domestic demand in China is still under observation. The service industry has seen robust growth in deposits and stable securities brokerage business, leading financial-related industries to view the economic outlook optimistically. In the construction industry, the positive atmosphere in the housing market is influenced by the domestic economic recovery and stable performance of the stock market.
According to the survey results from the Taiwan Institute of Economic Research (TIER), after model calculations, the Composite Indicators for the manufacturing, service, and construction industries all showed a simultaneous increase in January 2024. Specifically, the Composite Indicators for the service and construction industries have been on an upward trend for three consecutive months, while the manufacturing industry's Composite Indicators have been on an upward trend for two consecutive months.
In terms of Taiwan’s foreign trade, as opportunities in emerging applications such as artificial intelligence and high-performance computing continue to flourish, coupled with the lower base period last year due to the extended Lunar New Year holiday, exports in January saw a year-on-year increase of 18.1%, marking double-digit growth for two consecutive months. On the import side, the demand for integrated circuits rebounded, and manufacturers gradually replenished basic metals, plastics, and other raw materials before the New Year. The overall import growth rate in January shifted from a negative -6.5% last month to a positive 19.0%, putting an end to 14 consecutive months of negative growth in imports. The total value of exports in January 2024 exceeded 2.494 billion US dollars, showing a growth of 6.47%.
Although the prices of fruits and meat continue to rise significantly, vegetable prices have expanded their year-on-year decline due to stable weather conditions and ample supply, offsetting some of the overall inflation. Additionally, as January 2023 coincided with the Lunar New Year, resulting in a higher base comparison, the overall Consumer Price Index (CPI) decreased from 2.70% the previous month to 1.79%, and the core CPI also reduced from 2.43% to 1.64%. On the Producer Price Index (PPI) front, the decline persisted in January as natural gas prices dropped, coupled with decreases in prices of petroleum and coal products, basic metals, among others. However, the increase in electricity prices and rising agricultural product prices offset some of the declines, leading to a continued downward trend in the overall PPI to -0.46% in January 2024.

Business Survey Outcomes

The proportion of manufacturing firms that perceived their business as better than expected in the target month was 32.6%, an increase of 10.4 percentage points compared to respondents who perceived their business as better in the previous month. On the other hand, the proportion of those who perceived their business as worsening in the target month was 21.6%, an increase of 1.8 percentage points compared to the 19.8% of respondents who perceived their business as worsening in the previous month. Additionally, the proportion of manufacturing firms that perceived their business as remaining constant in the target month was 45.8%, which decreased by 12.2 percentage points compared to the ratio of respondents from the previous month who perceived their business as constant. In general, manufacturing firms seemed to express a rather optimistic stance regarding their business outlook.
Furthermore, in the target month, the segment of manufacturers who anticipated an improvement in their business over the next six months stood at 25.7%, representing a decrease of 9.9 percentage points compared to the 35.6% of respondents who were more optimistic about the near future in the previous month. Conversely, the portion of firms foreseeing a deteriorating economic outlook was 20.2%, marking an increase of 3.4 percentage points compared to the 16.8% of respondents who held a more pessimistic view of the near future in the previous month. Meanwhile, 54.1% of manufacturing firms perceived their business outlook as remaining constant in the next six months, showing an increase of 6.4 percentage point compared to the 47.7% of respondents who maintained a neutral stance on the business outlook one month earlier. Overall, manufacturing firms appeared to hold a more conservative view of the business outlook in the near future.
The TIER Manufacturing Composite Indicator for January 2024, adjusted for seasonal factors, underwent a corrective upturn. It increased from the revised figure of 97.06 points in December 2023 to 98.05 points in January 2024, marking an increase of 0.99 points, as illustrated in Figure 1.
In addition, the TIER Service Sector Composite Indicator for January 2024, analyzed as a moving average, exhibited an upward trajectory. It rose from a revised value of 93.22 points in December 2023 to 93.97 points in January 2024, reflecting an increase of 0.75 points, as depicted in Figure 1.
Lastly, the TIER Construction Sector Composite Indicator for January 2024, adjusted for seasonal factors and observed as a moving average, demonstrated an ascending trend. It climbed from the revised figure of 105.84 points in December 2023 to 106.49 points in January 2024, illustrating a notable increase of 0.65 points, as shown in Figure 1. Considering the factors outlined above, TIER’s composite indicators offer promising signals of economic revival.

Analyses and Outlook of Industries

Following are manufacturers' sentiments that are industry-specific in the monthly TIER surveys:

Manufacturers’ sentiments that have been in decline in the January survey and are expected to deteriorate over the next six months include:
None.

Manufacturers’ sentiments that have been in decline in the January survey, but are expected to improve over the next six months include:
None.

Manufacturers’ sentiments that have been in decline in the January survey and are expected to remain sluggish over the next six months include:
Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing, Cutlery and Tools Manufacturing, Communications Equipment and Apparatus Manufacturing.

Manufacturers surveyed who felt the January outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
None.

Manufacturers surveyed who felt the January outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Textiles Mills, Fabric Mills, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Leather, Fur and Allied Product Manufacturing, Wood and Bamboo Products Manufacturing, Paper Manufacturing, Printing, Glass and Glass Products Manufacturing, Metal Dies, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electric Wires and Cables Manufacturing, Audio and Video Electronic Products Manufacturing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Education and Entertainment Articles Manufacturing, Retail Sales, Restaurants and Hotels, Insurance, Telecommunication Services.

Manufacturers surveyed who felt the January 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, Industrial Chemicals, Petrochemicals Manufacturing, Petroleum and Coal Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Screw, Nut Manufacturing, Electrical Appliances and Housewares Manufacturing, Electronic Machinery, Data Storage Media Units Manufacturing and Reproducing, Electronic Parts and Components Manufacturing, Motorcycles Manufacturing, Precision Instruments Manufacturing, Transportation and Storage.

Manufacturers’ sentiments that have improved in the January survey and is expected to deteriorate over the next six months include:
None.

Manufacturers’ sentiments that have improved in the January survey and is expected to remain upbeat over the next six months include:
Food, Frozen Food Manufacturing, Edible Oil Manufacturing, Flour Milling and Grain Husking, Soft Drink Manufacturing, Yarn Spinning Mills, Man-made Fibers Manufacturing, Construction, Basic Civil Structure Construction, Real Estate Investment, Banks.

Manufacturers’ sentiments that have improved in the January survey and the trend is expected to continue for the next six months include:
Plastics and Rubber Raw Materials, Chemical Products Manufacturing, Rubber Products Manufacturing, Plastic Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Industrial Machinery, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Motor Parts Manufacturing, Motorcycles Parts Manufacturing, Wholesale, Securities.