With industrial output falling 2.33 percent last month — far deeper than the consensus forecast of a 1.67 percent contraction — economists voiced concern over the nation’s prospects in the coming quarters.
“Taiwan’s industrial production lost some momentum in April, with inventories beginning to build again,” Grace Ng (吳向紅), a Hong Kong-based economist at JPMorgan Chase Bank, said in a research report.
Ng said the Taiwanese economy may face rising risks, as manufacturing inventory climbs again and because of impact from the external environment.
EUROZONE
As the European sovereign and banking stress intensifies again, it may pose notable near-term risks on the eurozone’s economy, as well as for the rest of the world through trade of goods and services as well as financial linkages, Ng said.
“This could then pose meaningful risk on our current outlook for some moderate pace of expansion in Taiwan’s export and industrial sectors in the coming quarters,” she said.
Ng said it was crucial to closely monitor upcoming data for indications on near-term momentum for the global and Taiwan’s manufacturing sectors, with the release of purchasing managers’ index (PMI) to be the next focus.
Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered Bank, shared Ng’s view.
“Local producers are likely to have turned cautious amidst weak exports sales and orders data, preferring instead to keeping low inventories,” Phoo said in a research note.
DOWNSIDE RISK
The results may serve as a reminder of the downside risk to growth for central bank policymakers, he said.
Phoo said the central bank was likely to stay cautious and keep the benchmark policy rediscount rate unchanged at 1.875 percent during its next quarterly boarding meeting on June 28.
Polaris Research Institute (寶華綜合經濟研究院) said domestic manufacturing sector would take a longer time to recover amid the global economic uncertainties and because of a higher base effect, which would further weigh on the industrial production index.
“The industrial output index may record another 2.6 percent year-on-year decline for this month, before turning positive in June,” the Taipei-based think tank said in a statement.
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