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The Taiwanese Economy in June 2020
The world demand has recovered somewhat as the United States and European economies have started to reopen and restart their economic activities after weeks of lockdown; however, uncertainties betide due to increasing confirmed infected cases. Despite of remaining uncertainties, the recovery of global demand for the time being has indeed helped pick up all three composite indicators issued by the Taiwan Institute of Economic Research (TIER) once again. The manufacturing, service and construction composite indicators all went up in June.
Taiwan's exports in June 2020 decreased by 3.83% compared with the same month of 2019 in spite of a strong market demand for ICT parts and components with respect to higher base effect. Regarding imports, Taiwan's imports in June 2020 decreased by 8.59% compared with imports in June of 2019 due to the continuously dipping prices of raw materials. On the cumulative basis, Taiwan's exports and imports from January 1st till June 3oth of 2020 grew by 0.52% and -0.37% compared with the same period of previous year. The trade surplus during the period stood at US$ 21.35 billion or increased by 6.59% on the year-on-year basis.
Taiwan's consumer price index (CPI) decreased by 0.76% in June 2020 compared with the same month of previous year due to the still decreasing global crude oil and commodity prices. The core inflation rate excluding prices of the energy and food increased by 0.13% in June 2020. In addition, the wholesale price index (WPI) decreased by 10.36% in June 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 June 30th of 2020 drop by 0.22% and 8.20% respectively.
As for exchange rate, the NTD went somewhat stronger due to the relatively weaker USD. The NTD/USD stood at 29.66 in late June 2020 indicating a 1.24% appreciation. Regarding the interest rate, it remained low and steady in June 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 June 2020 stood at 0.078% and 0.101% respectively.
Business Outlook
The portion of manufacturing firms who perceived business were better than expected in the target month was 27.7% or increased by 1.4 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 31.2% or decreased by 6.1 percentage points than 37.3% perceiving worse business of the previous month. The portion of manufacturing firms who perceived business remained constant in the target month was 40.2% or increased by 3.8 percentage points compared with 36.4% perceiving constant business in the previous month. Overall, manufacturing firms perceived the business in the target month was somewhat optimistic than the previous month.
In addition, the portion of manufacturers who perceived business would be better in the next six months was 21.3% in the target month or decreased by 16.0 percentage points than 37.3% feeling more optimistic about the future in the previous month. The portion of firms who perceived the economic outlook would be worsening was 26.6% or increased by 4.6 percentage points compared with 22.0% 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 51.3% or increased by 10.6 percentage points compared with 40.7% feeling neutral about the business outlook one month earlier. Overall, manufacturing firms perceived the business in the near future was less optimistic and more neutral compared with the previous month.
The manufacturing composite indicator for June 2020 adjusted for seasonal factors on moving average, saw an upward correction, and from a revision of as 86.03 points in May 2020 moved up to 89.98 points. Figure 1 shows an increase of 3.95 points, the second month of consecutive increase.
The TIER service sector composite indicator for June 2020 adjusted for seasonal factors on moving average also saw an upward correlation, and from a revision of as 88.56 points in May 2020 moved up to 91.70 points. Figure 1 shows an increase of 3.14 points, the third month of consecutive increase.
In addition, the TIER Construction Sector Composite Indicator for the seasonal factors on moving average saw an upward correlation as well, and from a revision of 94.60 points in May 2020 went up to 98.78 points. Figure 1 shows an increase of 4.18 points, the second month 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 June survey and are expected to deteriorate over the next six months include:
Yarn Spinning Mills, Fabric Mills, Man-made Fibers Manufacturing, Screw, Nut Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery.
● Manufacturers' sentiments that have been in decline in the June survey, but are expected to improve over the next six months include:
None.
● Manufacturers' sentiments that have been in decline in the June survey and are expected to remain sluggish over the next six months include:
Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Banks, Insurance.
● 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:
Textiles Mills, Glass and Glass Products 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:
Apparel, Clothing Accessories and Other Textile Product Manufacturing, Non-metallic Mineral Products Manufacturing, Cement and Cement Products Manufacturing, Electrical Machinery, Electrical Machinery, Supplies Manufacturing and Repairing, Electric Wires and Cables Manufacturing, Audio and Video Electronic Products Manufacturing, Retail Sales.
● 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, Frozen Food Manufacturing, Wood and Bamboo Products Manufacturing, Metal Dies, Metal Structure and Architectural Components Manufacturing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Motorcycles Manufacturing, Precision Instruments Manufacturing, Education and Entertainment Articles Manufacturing, Telecommunication Services, Transportation and Storage.
● Manufacturers' sentiments that have improved in the June survey and is expected to deteriorate over the next six months include:
Leather, Fur and Allied Product Manufacturing, Industrial Chemicals, Petrochemicals Manufacturing, Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing, Restaurants and Hotels.
● Manufacturers' sentiments that have improved in the June survey and is expected to remain upbeat over the next six months include:
Soft Drink Manufacturing, Paper Manufacturing, Printing, Electrical Appliances and Housewares Manufacturing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Construction, Basic Civil Structure Construction, Real Estate Investment, Securities.
● Manufacturers' sentiments that have improved in the June survey and the trend is expected to continue for the next six months include:
Edible Oil Manufacturing, Flour Milling and Grain Husking, Prepared Animal Feeds Manufacturing, Plastics and Rubber Raw Materials, Chemical Products Manufacturing, Plastic Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Electronic Parts and Components Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Motor Parts Manufacturing, Motorcycles Parts Manufacturing, Wholesale.
TIER Forecast (issued on 24th July, 2020.)
(NT$100 million, Chained (2016) Dollars)
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