The Taiwanese Economy in April 2024

In the backdrop of geopolitical conflicts and major central banks maintaining high interest rate environments, the global economy has demonstrated resilience. The U.S. economy remains robust, Europe's economic performance is expected to gradually strengthen, with other regions also exhibiting resilience. However, recent escalations in geopolitical risks, coupled with ongoing trade frictions between the U.S., Europe, and China over specific industries, have added to global inflationary and trade development uncertainties. In Taiwan’s domestic manufacturing sector, amid the industry's low season, manufacturing orders, production, and exports in April declined compared to the previous month, leading to a shift in manufacturers' views towards neutral regarding the future six-month economic outlook. However, with gradual improvements in supply and demand, coupled with accelerated adoption of emerging technologies, global demand for consumer goods is gradually picking up. In Taiwan’s service sector, tensions in the Middle East and elevated inflation in the US, delaying rate cuts, have led to heightened volatility in financial markets in April. Additionally, the strong earthquake in Hualien hit tourism in the eastern region, and frequent food safety issues have made consumers more conservative in their brand choices. This resulted in a negative shift in the overall service industry’s perception of the month’s economic performance. As for Taiwan’s construction industry, despite a decrease in the number of working days in April compared to March, materials prices remained high and labor shortages persisted, slightly affecting the progress of some public projects. However, with the upswing in the domestic economy, fostering enterprises' expansion and engagement in commercial construction, along with the implementation of the Youth Secure Home policy and expectations of inflation, housing demand has been boosted, leading to a stable view regarding the current month’s economic performance.
According to the Taiwan Institute of Economic Research (TIER), after model simulations, the Composite Indicators for the manufacturing and service sector in April 2024 showed a slight increase, with remaining constant perception towards economic performance. The Composite Indicators for the construction industry reversed its two-month decline and turned upward.
Firstly, in terms of Taiwan’s foreign trade, amid the industry's low season, most sectors experienced lackluster order intake. However, benefiting from buoyant demand for emerging technologies like artificial intelligence and a low base effect, the information and communication technology (ICT) and audio-visual products managed to maintain positive year-on-year growth. This mitigated the decline in April's export growth rate from 18.83% the previous month to 4.31%.
On the domestic front, driven by the continuous growth in demand for artificial intelligence, high-speed computing, and cloud data services, the production momentum of the information electronics industry remains strong. Additionally, increased production in some traditional industries due to downstream inventory replenishment, along with a low base effect from the same month last year, contributed to a manufacturing production index of 87.30 in April, marking a year-on-year increase of 14.90%.
In the domestic financial market, the overnight interbank lending rate ranged between 0.808% and 0.819% in April 2024, with a weighted average of 0.812%, up 0.073 percentage points from the previous month and 0.131 percentage points higher than April 2023.
The stock market witnessed heightened volatility mid-month due to escalating geopolitical tensions between Israel and Iran, coupled with a lowered outlook from a major semiconductor foundry during its earnings call, triggering market panic. However, buoyed by robust first-quarter results from U.S. tech giants that bolstered global investor confidence, Taiwan SE weighted index closed at 20,396.60 in late April, a modest 0.50% gain, with an average daily turnover of NT$445.3 billion.
Regarding the exchange rates, persistent hawkish Fed rate hike expectations fueled U.S. dollar strength, dragging the Taiwan dollar lower against major non-USD currencies. The NT dollar closed the month at 32.542 against the U.S. dollar, depreciating 1.70%.

Business Survey Outcomes

The proportion of manufacturing firms that perceived their business as better than expected in the target month was 24.8%, a decrease of 19.3 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 18.0%, an increase of 5.3 percentage points compared to the 12.7% 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 57.2%, which increased by 14.0 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 slight concern about their business performance. Furthermore, in the target month, the segment of manufacturers who anticipated an improvement in their business over the next six months stood at 34.6%, representing a decrease of 5.5 percentage points compared to the 40.1% 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 10.0%, marking a decrease of 2.5 percentage points compared to the 12.5% of respondents who held a more pessimistic view of the near future in the previous month. Meanwhile, 55.4% of manufacturing firms perceived their business outlook as remaining constant in the next six months, showing an increase of 8.1 percentage point compared to the 47.3% of respondents who maintained a neutral stance on the business outlook one month earlier. Overall, manufacturing firms appeared to hold optimistic view of the business outlook in the near future.
The TIER Manufacturing Composite Indicator for April 2024, adjusted for seasonal factors, underwent a corrective upturn. It increased from the revised figure of 98.32 points in March to 98.67 points in April 2024, marking a slight increase of 0.35 points, as illustrated in Figure 1.
In addition, the TIER Service Sector Composite Indicator for April 2024, analyzed as a moving average, also exhibited an upward trajectory. It rose from a revised value of 95.05 points in March to 95.70 points in April 2024, reflecting a slight increase of 0.65 points, as depicted in Figure 1.
Lastly, the TIER Construction Sector Composite Indicator for April 2024, adjusted for seasonal factors, demonstrated an upward trend. It turned up from the revised figure of 103.15 points in March to 107.39 points in April 2024, illustrating a notable increase of 4.24 points, as shown in Figure 1.

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 April survey and are expected to deteriorate over the next six months include:
Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing.
　
Manufacturers’ sentiments that have been in decline in the April survey, but are expected to improve over the next six months include:
Apparel, Clothing Accessories and Other Textile Product Manufacturing, Rubber Products Manufacturing, Metal Structure and Architectural Components Manufacturing, Restaurants and Hotels, Banks, Securities.
　
Manufacturers’ sentiments that have been in decline in the April survey and are expected to remain sluggish over the next six months include:
Petroleum and Coal Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Wholesale, Insurance.
　
Manufacturers surveyed who felt the April outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Motorcycles Manufacturing, Motorcycles Parts Manufacturing.
　
Manufacturers surveyed who felt the April outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Food, Frozen Food Manufacturing, Yarn Spinning Mills, Leather, Fur and Allied Product Manufacturing, Paper Manufacturing, Man-made Fibers Manufacturing, Porcelain and Ceramic Products Manufacturing, Electrical Machinery, Supplies Manufacturing and Repairing, Communications Equipment and Apparatus Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Precision Instruments Manufacturing, Basic Civil Structure Construction, Retail Sales, Telecommunication Services.
　
Manufacturers surveyed who felt the April outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain Husking, Prepared Animal Feeds Manufacturing, Industrial Chemicals, Plastics and Rubber Raw Materials, Chemical Products Manufacturing, Plastic Products Manufacturing, Glass and Glass Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Electrical Appliances and Housewares Manufacturing, Electronic Machinery, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Motor Parts Manufacturing, Transportation and Storage.
　
Manufacturers’ sentiments that have improved in the April survey and is expected to deteriorate over the next six months include:
None.
　
Manufacturers’ sentiments that have improved in the April survey and is expected to remain upbeat over the next six months include:
Soft Drink Manufacturing, Textiles Mills, Fabric Mills, Wood and Bamboo Products Manufacturing, Electrical Machinery, Electric Wires and Cables Manufacturing, Audio and Video Electronic Products Manufacturing, Electronic Parts and Components Manufacturing, Education and Entertainment Articles Manufacturing, Construction, Real Estate Investment.
　
Manufacturers’ sentiments that have improved in the April survey and the trend is expected to continue for the next six months include:
Printing, Petrochemicals Manufacturing.