The unexpected declines in the nation’s export orders and in industrial production last month indicated that the economy is cooling down, but remains on course to stage a mild recovery this year, foreign institutes said.
Export orders, a bellwether of actual shipments in one to three months, contracted 6.6 percent year-on-year last month, missing market expectations of a 1.9 percent increase, as orders were dragged down by weaker demand for petrochemicals, semiconductors and plat panels, the Ministry of Economic Affairs said on Monday.
On Tuesday, the ministry said that industrial production slipped 3.3 percent last month from the same period a year earlier, falling beneath the consensus forecast of 1.8 percent growth and pushing the economic gauge for the first quarter into negative territory.
“The data was weaker than expected and highlights how Taiwan’s economic recovery is tracking that of the global economy — a gradual, but bumpy upward trend,” Moody’s Analytics economist Katrina Ell said in a note.
The global economy will likely lose some steam in the second half of the year on the back of US budget constraints and China’s recovery failing to positively surprise analysts so far, Moody’s said.
Australia and New Zealand Banking Group (ANZ) attributed the falling export orders to a weakening Japanese currency.
“Taiwanese manufacturers may be reluctant to receive orders on concerns over recent movements in the regional exchange rates,” ANZ Greater China economist Louis Lam (林慕爾) said in a note.
While the retreat was seen across the board, orders from Japan saw the largest decline, down 15.6 percent from a year ago, Lam said.
The drop in Taiwan’s export orders could cause a potential disruption to the regional supply chain because the nation is a key upstream manufacturer for electronic products, Lam said.
HSBC PLC called the latest data disappointing, adding that they serve as a reminder of the downside risks facing Taiwan’s growth outlook.
Orders for electronics, information technology and telecommunications products — which account for about one-quarter of total orders — fell by 5.5 percent last month from a year earlier, HSBC Greater China economist Donna Kwok (郭浩庄) said in a report.
The contraction in industrial production added material downside risks to HSBC’s forecast of 3.1 percent growth in Taiwan’s GDP for the first quarter, though it should stay positive, Kwok said.
The latest economic data suggest that the nation’s manufacturing-driven economy is recovering, albeit at a slower pace than expected, partly because it took longer than expected for the distortions caused by the Lunar New Year holiday to fade, she said.
Fortunately, the modest growth in first-quarter commercial sales — an indicator of the strength of domestic demand — somewhat counterbalanced the manufacturing slowdown, Kwok said.
Export orders and industrial production may improve starting this month given the healthy demand for semiconductor equipment and the recent global launch of the new series of HTC Corp’s (宏達電) flagship One smartphone, Barclays Capital PLC said in a report.
“Leading indicators for the tech industry continue to look bright,” Barclays said.