Hopes for recovery dampen as order books go unfilled

Taiwan's manufacturers received fewer overseas orders and cut production in October, signaling the country's first recession in a quarter-century may extend into next year.

Export orders dropped 12.31 percent from a year earlier to US$11.98 billion after falling a record 26.8 percent in September, the Ministry of Economic Affairs said. Factory production dropped 6.73 percent. Both fell for an eighth month.

Stalled growth and falling production in the US, which buys about a fifth of Taiwan's exports, are crimping sales at companies like Nanya Technology Corp (南亞科技). Taiwan's economy, which shrank 4.21 percent in the third quarter from a year earlier, may keep contracting next year as exports drop, economists said.

The figures are "better than expected, but it's too early to conclude there's any bottoming out," said Franklin Poon, an economist at ABN Amro Holdings NV in Hong Kong. He said delayed orders from September, when terrorist attacks disrupted business in the US, helped slow the decline last month.

The government predicts exports, which account for about half of the economy, will likely contract 17 percent this year. It's counting on a rebound in the US economy to meet a 3.3 percent export growth target next year.

That revival may take longer than expected in the wake of the Sept. 11 attacks. The US economy, which contracted at a 0.4 percent annual pace in the third quarter, may keep shrinking through the first half of next year, according to the Organization for Economic Cooperation and Development.

Export orders will probably rise about 5 percent next year as the US economy returns to growth, said Chang Yao-tsung (張耀聰), director of the department of statistics at the Ministry of Economic Affairs. Industrial production will grow less than 5 percent, he predicted.