The Taiwanese Economy in November 2022

The end market demands of the US and Europe have continued to shrink, since the US Federal Reserve (Fed) and European Central Bank (ECB) both conducted tightening monetary operations with unprecedented rate-hiking measures to cope with inflation. Despite of the fact that the Fed and the ECB did slow down the pace of interest rate hikes in December, both of them simultaneously revised down the economic growth performance in 2023. Nevertheless, global inflationary pressures are still high, so the central banks of various countries will maintain a positive policy stance, trying to contain inflation. Declining end demands would certainly hinder the operation of global value chains (GVCs), whereas Taiwan is an important part of GVCs. The impacts have been on Taiwan’s exports as a result. However, the manufacturing and service composite indicators issued by the Taiwan Institute of Economic Research (TIER) rallied in November 2022 showing a dim light at the end of the tunnel. Nevertheless, TIER’s construction composite indicator continued to drop because of slowing GDP growth, higher mortgage rate, and government policies aiming to further cool off the domestic housing market.
In fact, Taiwan’s economic performance in external markets has been slowing down, and the export orders have been weakening. Taiwan’s exports in November 2022 decreased by 13.08% compared with the same month of 2021. Regarding imports, Taiwan’s imports in November 2022 dropped by 8.65% compared with imports in November of 2021. Taiwan’s exports and imports from January till the end of November 2022 gave a trade surplus as at US$ 47.136 billion or decrease by 19.65% year-on-year due to still costly in imports of commodities and slowing growth in exports.
Taiwan’s consumer price index (CPI) increased by 2.35% in November 2022 compared with the same month of previous year, which would be 0.39 percentage points lower than the inflation rate of previous month. The core inflation rate excluding prices of the energy and food increased by 2.86% in November 2022, which would be 0.11 percentage points lower than the core inflation rate in October 2022. In addition, the wholesale price index (WPI) increased by 9.07% in November 2022 on the year-on-year basis, ending the consecutive twelve-month in double digit growth. The pressure of surging input costs is still quite serious. Therefore, some producers are nonetheless transferring the costs to consumers to break even.
As for exchange rate, the NTD went somewhat stronger due to the relative trend of USD exchange rate in November 2022. Despite the US Federal Reserve’s monetary policy is still relatively hawkish in order to cope with the inflation. The NTD/USD stood at 30.90 in late November 2022, indicating a 4.23% appreciation. The Taiwan central bank (CBC) raised its key interest rates by 0.125 percentage points on 16th December 2022. Regarding the over-night call rate; the lowest and highest rate in November 2022 stood at 0.431% and 0.440% respectively.

Business Survey Outcomes

The portion of manufacturing firms who perceived business were better than expected in the target month was 10.4% 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 42.1% or increased by 5.8 percentage points as respondents perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 47.5% or decreased by 6.6 percentage points than the ratio of previous month’s respondents perceiving constant business. Overall, manufacturing firms perceived the business in the target month was still pessimistic about the business conditions.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 20.9% in the target month or increased by 7.2 percentage points than 13.7% of respondents feeling more optimistic about the near future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 33.9% or decreased by 4.5 percentage points compared with 38.4% of respondents feeling rather pessimistic about the near future in the previous month. The portion of manufacturing firms who perceived business remained constant in the next six months stood at 45.3% or decreased by 2.6 percentage points compared with 47.9% of respondents 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 optimistic compared with the outcome of previous survey.
As a result, the manufacturing composite indicator for November 2022 adjusted for seasonal factors on moving average, saw a upward correction, and from a revision of as 83.92 points in October moved up to 84.79 points in November 2022. Figure 1 shows an increase of 0.87 points, the first month of increase ending a ten-month of consecutive decrease.
Moreover, the TIER service sector composite indicator for November 2022 on moving average also saw a upward correlation, and from a revision of as 90.90 points in October moved slightly up to 91.21 points in November 2022. Figure 1 shows an increase of 0.31 points, the first month of increase ending a three-month of consecutive dip.
Last but not the least, the TIER construction sector composite Indicator for November 2022 adjusted for the seasonal factors on moving average saw a downward correlation, and from a revision of 85.84 points in October went down to 85.60 points in November 2022. Figure 1 shows a decrease of 0.24 points, the fourth month of consecutive dip.

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 November survey and are expected to deteriorate over the next six months include:
Textiles Mills, Paper Manufacturing, Industrial Chemicals, Petrochemicals Manufacturing, Man-made Fibers Manufacturing, Cutlery and Tools Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Bicycles Parts Manufacturing, Transportation and Storage.

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

● Manufacturers’ sentiments that have been in decline in the November survey and are expected to remain sluggish over the next six months include:
Manufacturing, Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Metal Structure and Architectural Components Manufacturing, Audio and Video Electronic Products Manufacturing, Motorcycles Manufacturing, Construction, Basic Civil Structure Construction, Wholesale, Insurance.

● Manufacturers surveyed who felt the November outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Yarn Spinning Mills, Fabric Mills, Leather, Fur and Allied Product Manufacturing, Glass and Glass Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Industrial Machinery, Electronic Parts and Components Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Bicycles Manufacturing, Real Estate Investment.

● Manufacturers surveyed who felt the November outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Food, Slaughtering, Frozen Food Manufacturing, Soft Drink Manufacturing, Printing, Electrical Appliances and Housewares Manufacturing, Motorcycles Parts Manufacturing, Education and Entertainment Articles Manufacturing.

● Manufacturers surveyed who felt the November outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Prepared Animal Feeds Manufacturing, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Wood and Bamboo Products Manufacturing, Plastics and Rubber Raw Materials, Plastic Products Manufacturing, Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Cement and Cement Products Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electronic Machinery, Retail Sales.

● Manufacturers’ sentiments that have improved in the November survey and is expected to deteriorate over the next six months include:
Securities.

● Manufacturers’ sentiments that have improved in the November survey and is expected to remain upbeat over the next six months include:
Edible Oil Manufacturing, Flour Milling and Grain Husking, Precision Instruments Manufacturing, Restaurants and Hotels, Banks, Telecommunication Services.

● Manufacturers’ sentiments that have improved in the November survey and the trend is expected to continue for the next six months include:
Chemical Products Manufacturing, Electric Wires and Cables Manufacturing, Communications Equipment and Apparatus Manufacturing, Motor Parts Manufacturing.