The New Year Brings some positive news. While no one seems able to agree on whether the new Chinese year is the Year of the Sheep or the Goat, the Taiwan economy broadly speaking bears more resemblance to a charging Ram.
The Taiwan economy beat most growth forecasts in 2014 to come in at 3.74%, according to the Directorate General of Budget, Accounting and Statistics (DGBAS) – considerably higher than the DGBAS’s own late-year forecast of 3.41%. 2015 is expected to be even better; DGBAS has raised its forecast from 3.51% to 3.78% based on expectations of strong manufacturing performance and rising projections for the global economy.
The inflation picture also looks favorable. Taiwan’s Consumer Price Index fell by 0.94% year-on-year in January on the one-two punch of plunging oil prices, which bottomed out below US$50 that month, and declines in heavily weighted housing prices, which slumped 2.17%. The Ministry of Interior reported that total housing transactions decreased by 14% in 2014, and the declines continued into January.
Although the inflation index dropped in January, consumers might well have failed to notice, as core consumer prices advanced somewhat, by 0.64%, while food prices rose 4.45%. Since Taiwan imports some 98% of its energy needs, falling energy prices have a strong impact on consumption and have raised consumer confidence to a record level of 88.23 on the index tracked by National Central University. The unemployment rate came to 3.79% in December, the fourth straight month to show a drop.
Exports rose in January on a year-to-year basis by 3.4%, to US$25.11 billion, over imports of US$20.32 billion, for a favorable balance of US$4.8 billion. Taiwan’s depreciating currency had an impact on these figures; with the New Taiwan dollar falling to 32:1 against the U.S. dollar in January, the numbers look better in NT$ terms than in U.S. dollars. For example, while total trade in January increased on an annual basis in NT$ terms by 5.5%, it actually declined in US$ terms, by 0.4%.
Taiwan’s technology manufacturing sectors continue to be the main drivers of exports, accounting for 43.5% of the total, or US$10.91 billion. With the inclusion of the machinery sector, which saw annualized growth of 18% in January, the combined machinery and electronics industries comprised 50.6% of all exports, and gained 10.9% year-on-year to reach US$12.70 billion. New export orders, a leading indicator, rose 4.52% in December 2014, the latest figure available from the Ministry of Economic Affairs, while the DGBAS’s Purchasing Managers Index (PMI), an indicator of manufacturer’s sentiment, rose from 50.1 in December to 53.5 in January, also signaling growing optimism for the Taiwan economy.