Taiwan’s foreign trade and manufacturing activity accelerated last month while inflation eased, indicating that the economy is gaining steam, but economists said they were still cautious about whether the growth can be sustained.
Last month, exports rose 21.8 percent year-on-year to US$25.67 billion, following a 9 percent increase in December, while import growth accelerated by 22.3 percent — far stronger than the previous month’s 1.6 percent increase — to US$25.2 billion, the Ministry of Finance reported on Thursday.
The ministry said the latest figures confirmed a rising trend in exports in the months ahead, but economists took note of last year’s Lunar New Year holiday in January, which led to a sharp annual growth in exports.
The week-long festival, which causes companies to shut down and results in fewer working days for the month, takes place at a different time each year. Last year it was in January and this year it is in February.
“We are not reading much into the sharp acceleration in exports and imports on a year-on-year basis because of a low base effect. For January and February data, it is difficult to see what is going on beyond the Lunar New Year distortion,” Katrina Ell, an associate economist at Moody’s Analytics, said in a research note on Thursday.
Sydney-based Ell said the trade data would remain distorted for this month, with exports expected to fall sharply year-on-year due to a high base effect.
“We will have to wait until March data is released [in early April] to see how the tech cycle’s recovery path is progressing,” she said, citing the book-to-bill ratio for North America-based semiconductor equipment manufacturers as a reasonable indicator of Taiwan’s export outlook.
The book-to-bill ratio improved to 0.92 in December from 0.79 in November last year, the semiconductor industry association SEMI reported on Jan. 25.
Though remaining below the healthy level of one for a seventh straight month, the figure had been trending higher for three straight months to hit the highest level in six months in December, according to SEMI’s data. The association is expected to release last month’s data later this month.
Last month’s inflation figure was up 1.15 percent from a year earlier, from an increase of 1.6 percent in the previous month, according to data released by the Directorate-General of Budget, Accounting and Statistics (DGBAS) on Tuesday.
The seasonal pickup in demand over the Lunar New Year, rising global crude oil prices and a lower comparison base in February last year are likely to push the consumer price index (CPI) 3 percent higher over the year-earlier level this month, private think tank Yuanta-Polaris Research Institute (元大寶華研究院) said in a research note on Wednesday.
Christiaan Tuntono, a Hong Kong-based economist at Credit Suisse, agreed that this month’s CPI would rise on the back of the Lunar New Year’s distortion effect, but said what policymakers in Taiwan should focus on now is how to sustain economic growth, rather than managing inflation.
“Although macro-economic indicators have rebounded from their soft patch, structurally we think Taiwan’s economy remains weak and hence are not concerned about a sustained rise in price pressure,” Tuntono said in a report issued on Wednesday.
The DGBAS expected Taiwan’s GDP to expand 3.42 percent in the October-to-December quarter and the economy to grow 1.25 percent for the whole of last year from 2011, it reported on Jan. 30.
The government is hoping for 3.53 percent GDP growth this year, higher than its previous forecast of 3.2 percent made in November last year. Credit Suisse said the economy is likely to expand by 3.4 percent this year, but did not expect the strong growth momentum seen last quarter could be sustained.
“We anticipate a more moderate growth pace in the coming quarters, unless the global economy shows stronger signs of improvement,” Tuntono said.