After a brief moment of joy over the nation’s exports finally increasing at an annual rate of 10.4 percent in September, ending six consecutive months of declines, last month’s foreign trade data, released last week, showed outbound shipments tumbled again, declining by 1.9 percent from the same period a year ago.
The latest data suggest that the light at the end of the economic tunnel seen a month ago might be just an illusion, as the September results were perhaps due to temporary factors — such as the launches of new consumer electronics products and downstream vendors’ inventory buildups to meet consumer demand ahead of China’s annual Golden Week holiday — and that they came from last year’s low comparison base.
However, the most obvious implication is that Taiwan’s economy is still suffering from sluggish global economic activity and the nation could be the worst performer among Asia’s major exporters this year. Therefore, both the government and the public should remain alert for signs of a worsening downturn.
On Thursday, the Ministry of Finance reported that exports unexpectedly fell 1.9 percent last month from a year earlier and were 2.4 percent down from the previous month, at US$26.53 billion. Imports also performed worse than expected last month, dropping 1.8 percent year-on-year and up 0.78 percent month-on-month at US$23.27 billion. Cumulative exports in the first 10 months of the year dropped 3.7 percent to US$250.13 billion, while cumulative imports fell 4.7 percent to US$227.26 billion, the ministry’s data showed.
According to the ministry, the reason that exports resumed their decline was because eight of the nation’s 10 major export sectors posted year-on-year contractions in shipments, which was led by a 36.1 percent fall in shipments of information and communication technology (ICT) products (including HTC Corp’s smartphones and Acer Inc’s personal computers). Moreover, with still-weak exports to the US and Europe, slowing growth in exports to Asian economies also took a toll on outbound shipments last month, raising concerns about the prospects for intra-regional trade.
Although a high comparison base could be blamed for the disappointing foreign trade figures, it is not sufficient to justify last month’s surprising decline. Instead, it allows further room to worry about the underlying health of Taiwan’s ICT sector, as the ministry’s data showed it continued to present the largest contraction among the 10 major export categories since May.
There is cause for concern over the declining global competitiveness of Taiwanese ICT products. During previous downturns this sector’s exports were hit harder than those of the nation’s major trading rivals and did not recover at a faster pace when the global economy started to rebound. This issue also highlights the challenge facing the nation in transforming its industrial structure and diversifying exports beyond ICT.
The latest data indicated that overall imports remained in low gear last month. However, a closer look at the data showed that imports of capital equipment increased 4.2 percent last month from a year earlier, following a 0.2 percent decline the previous month, and had improved for three consecutive months. This did offer positive signs for the economy as it might indicate stronger domestic investment in the months ahead.
However, an annual decline of 0.6 percent in consumer goods imports, after an 11.3 percent increase in September, is a strong reminder that private consumption could be a major drag factor on domestic demand.
Looking ahead, the ministry said exports for this month and next month could see modest growth because of seasonal demand and it did not rule out the contribution of a low-base effect. Late last month, the Directorate-General of Budget, Accounting and Statistics forecast that full-year exports could fall 2.5 percent to show the first contraction since the global financial crisis began, and the latest foreign trade data suggested prospects for Taiwan’s exports remain cloudy, and that the possibility of further downward adjustments to exports, as well as to GDP growth, exist.