Taiwan Economic Outlook – October 2019

Oil Prices Are Up And So Are Exports

Fuel prices have been rising in Taiwan in recent months, a result of fluctuations in global crude prices brought on by tensions in the Middle East. The latest hikes are tied to the drone strikes on Saudi Aramco facilities that took place in mid-September. Gasoline prices in Taiwan rose NT$0.5 and diesel prices NT$0.9.

August was a positive month for export-oriented businesses. Total exports increased year-on-year by 2.6%, including a 22.8% jump in exports to the U.S. The marginal 1% increase in exports to China ended a nine-month decline from 2018 levels in shipments to that market. Total imports for the month decreased by 2.7% from August 2018. For the first eight months of this year, Taiwan registered a US$29.5 billion surplus, down 9.2% from the same period last year.

Meanwhile, export orders fell again in August, continuing a 10-month trend. The month-on-month decrease – 2.5% when adjusted for inflation – is linked to ongoing trade tensions between the U.S. and China, which have slowed demand and created global economic uncertainty. The machinery industry experienced the steepest drop at 26.2% from August the previous year. Other industries heavily impacted include ICT, whose export orders fell year-on-year by 9.7%, and petrochemicals, which experienced a 19.2% decline from August 2018.

The U.S.-China trade war has also affected Taiwan’s output, as manufacturing in August underwent its fourth month of contraction. The Purchasing Manager’s Index (PMI) compiled by the Chung-Hua Institution for Economic Research (CIER) saw a slight increase of 0.2 points, but remained below the 50-point threshold that is considered to indicate growth. CIER’s President, Chen Shi-kuan, noted that as long as higher U.S. tariffs on goods manufactured in China remain in place, Taiwanese exporters who maintain operations in China will continue to be affected.

The Directorate General of Budget, Accounting and Statistics (DGBAS) reported a .07 percentage point increase in the jobless rate for August, bringing unemployment to 3.89%. DGBAS attributed the increase to the influx of new graduates entering the job market. However, there is hope for the new job-seekers: the Ministry of Labor (MOL) in September predicted that jobs will increase by 36,400 in the final quarter. MOL cited a growth in job vacancies arising from the resignation or retirement of current employees and the return of Taiwanese companies to the island, and noted that Q4 is traditionally the peak season for tech products in Taiwan.

The Ministry of Economic Affairs reported that retail trade sales for August increased 4.5% year-on-year to reach NT$308.8 billion, while food and beverage service sales jumped 5.7% from the August 2018 level. At the same time, wholesale trade sales saw a 5.7% decline year-on-year.

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