Taipei, Confidence in the local economy weakened in October with unfavorable external factors, in particular escalating trade tensions between the United States and China, undermining sentiment on the economic climate, according to a survey conducted by Cathay Financial Co.
Washington imposed a 10 percent tariff on US$200 billion worth of Chinese goods in September after imposing a 25 percent tariff on US$60 billion worth of Chinese merchandise earlier this year. The 10 percent tariff is expected to rise to 25 percent by the end of this year.
U.S. President Donald Trump has even threatened to slap tariffs on an additional US$267 billion worth of Chinese goods, and if that happens and total U.S. tariffs on Chinese imports rise to US$500 billion there would be an all-out trade war between the top two economies in the world.
With no sign that Washington-Beijing trade disputes will be resolved anytime soon and faced with their likely impact on global demand, Cathay Financial cited the survey as saying 16 percent of respondents believed the local export-oriented economy had improved from six months earlier, while 48.8 percent said the economy had deteriorated over the same period.
Those figures translate into an economic optimism index figure for the economy of minus 32.8 in October, down from minus 29.5 in a similar poll conducted in September.
In addition, the economic optimism index for economic conditions over the next six months also fell from minus 28.8 in September to minus 31.7 in October, according to the survey.
The downbeat outlook toward the economy was also reflected in a more cautious view of Taiwan's labor market with pessimism continuing to prevail.
The optimism index for the current labor market fell from minus 32.4 in September to minus 33.8 in October, while the optimism index for the next six months rose slightly from minus 33.9 in September to minus 33.5 in October, Cathay Financial said.
Falling confidence in the local economy was also reflected on the wage front.
The index gauging perceived improvement in wages over the past six months fell from minus 0.8 in September to minus 1.3 in October, and the index gauging confidence in wage increases over the next six months dropped from minus 2.6 to minus 3.9, according to the survey.
A more pessimistic mood toward the economy means that consumers are also more reluctant to spend, Cathay Financial said.
The index gauging the willingness of consumers to buy big ticket items, such as homes and cars, fell from minus 5.0 in September to minus 5.3 in October, while the index on willingness to purchase durable goods dropped from minus 21.1 in September to minus 23.3 in October, the survey found.
Meanwhile, optimism toward the local stock market fell from minus 20.1 in September to minus 25.6 in October, while the index gauging investors' appetite for risk also fell from minus 8.5 to minus 10.8, the survey showed.
Cathay Financial said average GDP growth for 2018 expected by respondents in the October survey was 2.3 percent, unchanged from a month earlier, indicating investors appear more cautious than the government.
In mid-August, the Directorate General of Budget, Accounting and Statistics raised its forecast for Taiwan's 2018 GDP growth to 2.69 percent, from an earlier estimate of 2.60 percent in May. The upgrade in forecast resulted from a better than expected performance in the first half of this year.
The results of the survey, conducted from Oct. 1-7, were based on 16,985 valid online questionnaires from clients of Cathay Life Insurance and Cathay United Bank, which are 100 percent owned by Cathay Financial.
Source: Focus Taiwan News Channel