The Economy is Improving with Help from Exports

With sharp criticism of major trade partners and promises of protectionism in trade, the new administration of U.S. President Donald Trump has injected substantial policy uncertainty into the global economy. Nevertheless, the American economy continues to be the engine of global trade, and Taiwan’s trade figures are benefiting. Into January, Taiwan’s exports continued the upward trend that started in the second half of 2016, with exports reaching US$23.74 billion for the month for a rise of 7% in annual comparisons to, according to the Bureau of Foreign Trade under the Ministry of Economic Affairs (MOEA). The increase is particularly significant considering that the lunar new year holiday this year fell mostly in January, whereas it occurred in February in 2016.

Exports to the United States, Taiwan’s second largest export market, came in at US$2.82 billion in January, a 3.8% rise in year-on-year comparisons, increasing in share from 10% in 2016 to 11.9% of total exports. At US$9.2 billion, exports to China/Hong Kong rose 7.6% and comprised a much larger 38.8% total export share, reflecting China’s steady 6.5% GDP growth, as well as the continued strength of U.S. demand, increasing the flow of electronic components from Taiwan to China for assembly into finished goods for export. Electronics exports, which comprise some 32.7% of all exports, saw a 10% gain in January.

Global commodity prices are also rising, benefiting Taiwan’s metals exports, which account for 9.4% of total exports and which gained 13.7% in January. Crude oil also gained ground in recent months and Taiwan’s plastics industries likewise benefited, increasing 3.2% on its 6.8% share of exports.

Goldman Sachs forecasts global economic growth of 3.5% in 2017 – at the high end of the range for the last five years – spurred not only by relatively strong growth of 2-3% in the United States but also by 1.5% in the European Union, 1% in Japan, and the steady 6.5% in China. Taiwan’s exports in January reflect this trend, with exports to the EU, 10% of total exports, increasing by 7.5% in January to US$2.38 billion, while ASEAN nations, which are seeing renewed growth with the recovery in commodity prices, took 18.7% of Taiwan’s exports in January, a 11.3% rise to reach US$4.44 billion.

Imports, at US$20.24 billion, were also up for January, by 8.4%, making for a favorable trade balance of US$3.49 billion.

According to the Chunghwa Institution for Economic Research (CIER), Taiwan’s Purchasing Managers Index (PMI), a leading indicator reflecting manufacturing sentiment, remained in positive territory at 53.4, a slight 2.5% decline from December’s 55.9 mark. Export orders, another leading indicator for Taiwan’s manufacturing sector, likewise rose in annual comparisons for the sixth consecutive month, according to the MOEA; the total of US$35.97 billion was a rise of 5.2%, on the back of a 6.3% gain in December. The MOEA attributed the gains primarily to increased global demand for electronics.

Inflation rose slightly in January, with the Consumer Price Index showing an increase of 2.25% over the same month last year, up from December’s 1.7%. Unemployment remained low at 3.79% for December, a drop from November’s 3.87%. Consumer confidence, however, fell to a four-year low as measured by the Consumer Confidence Index released by National Central University.