Tue, Jul 31, 2012 - Page 14 News List

GDP likely to grow 0.6% in Q2: Moody’s Analytics

STRONGER SECOND HALF?Key product launches in the second half are driving demand for components, but the book-to-bill ratio last month fell below parity

By Crystal Hsu  /  Staff reporter

The first reading of Taiwan’s GDP is likely to show a small 0.6 percent expansion in the second quarter from the same period last year, which is still better than the first quarter’s 0.39 percent rise, Moody’s Analytics said yesterday.

The Directorate-General of Budget, Accounting and Statistics (DGBAS) is due to release the figures today.

In May, DGBAS said the first-quarter GDP growth of 0.39 percent was the lowest level in more than two years and forecast the economy would expand 0.77 percent in the second quarter, 4 percent in the third quarter and 6.55 percent in the fourth quarter.

“Taiwan’s economy likely grew 0.6 percent in the second stanza of this year, as weak global tech demand has weighed on exports and private consumption,” Moody’s Analytics associate economist Katrina Ell said in a note.

With economic growth closely tied to the global technology cycle, downswings and upswings are reflected in headline GDP growth, the note said.

However, electronics production will strengthen in the second half, helping the nation’s export-focused economy to recover, Moody’s Analytics said.

For months, leading indicators of technology demand have been suggesting a second-half recovery, with downside risks attached, Ell said.

From February to May, the US semiconductor book-to-bill ratio was above parity, indicating that the number of orders received exceeded the value of product shipped during the past three months, she said.

Some key product launches later in the year are driving the current upturn in demand for components and Taiwan stands as the biggest beneficiary, she said.

However, the book-to-bill ratio last month fell below parity for the first time since January, clouding the industry’s outlook, as weak demand has delayed capital spending by US semiconductor manufacturers, Ell said.

The slowdown in manufacturing orders came mainly from Europe, while US domestic demand is still holding firm, she said, adding that this is good news, because the US is a major final destination for consumer electronics.

Taiwan Research Institute (台灣綜合研究院) president Wu Tsai-yi (吳再益) said on Saturday he expected the DGBAS to cut its GDP growth forecast to about 2 percent for this year, because of the poor economic data seen during the first half of this year.

Wu said poor performance in exports and investments led to weak domestic demand and made it difficult to predict when the economy would reach its lowest point, which was previously forecast to take place in the second quarter.

Additional reporting by CNA

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