Thu, Jul 28, 2011 - Page 11 News List

US economic rebound to aid Taiwan: bank analyst

MORE LOLLY:The increases in crude oil prices eroded US households’ disposable income in the first half of this year, but the situation is unlikely to repeat itself

By Crystal Hsu  /  Staff Reporter

The US economy is likely to experience a strong rebound during the remainder of this year, which bodes well for Taiwan’s exports of smartphones and consumer electronics products, Standard Chartered Bank said yesterday.

The US could see an increased recovery in the coming months supported by rising consumer and investment spending as oil prices stabilize and a tax incentive expires at the end of next year, Steve Brice, chief investment strategist at Standard Chartered, told a media briefing in Taipei.

The increases in international crude oil prices eroded 1.5 percent of US households’ disposable income in the first half of this year, but the situation is unlikely to repeat itself in the second half, allowing Americans to spend more, Brice said.

Improving personal savings are expected to boost consumption, although the high jobless rate may continue to weigh on the US economy, the investment strategist said.

US companies will help stage a strong rebound by taking advantage of an investment tax credit, which is scheduled to expire at the end of next year, Brice said.

The stable US economic recovery is favorable for Taiwan’s export-focused economy because the US is the world’s largest end-market for consumer electronics and communications products.

Export orders — a gauge of real overseas shipments one to three months in the future — from the US rose 16.52 percent year-on-year to a record high of US$8.81 billion last month, staying above the US$8 billion mark for a fourth consecutive month, the Ministry of Economic Affairs said last week.

The ministry attributed the aggressive increase in US orders to consumer demand for smartphones and tablets.

Standard Chartered is also upbeat about the recovery elsewhere in the world.

Brice said Japan is poised for a V-shaped recovery late this quarter onward, albeit from very depressed levels.

“We have already started to see an improvement in economic activity and expect a strong rebound once Japan kicks off its reconstruction effort,” Brice said.

The devastation of a powerful earthquake and tsunami on March 11 weakened Japan’s export orders, which contracted 15.95 percent to US$3.59 billion last month from the same period last year.

In Europe, the economy will fare relatively well despite the sovereign debt crisis, Brice said, although the British banking group does not expect Europe to be a driver of global growth for the foreseeable future.

China’s GDP growth is expected to slow to 7 percent this quarter following an extended cycle of monetary policy tightening, but it may regain momentum next year as inflationary pressures subside, Standard Chartered said.

“We expect inflation to start falling next month,” Brice said. “The signs of economic slowdown may lead [Chinese] authorities to ease policy at the turn of the year, allowing the economy to rebound over 10 percent in 2012.”

The main risks to the global economic outlook include deterioration in the European sovereign debt crisis, a slower US economic recovery and a hard landing in China, Brice said, adding that ratings downgrades on US sovereign debt may also lead to a market collapse.

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