Taiwan: Growth slows markedly in Q3 on sharp export deceleration amid a high base effect
October 31, 2018
A preliminary estimate shows that economic growth softened significantly in the third quarter, largely due to a deceleration within the all-important trade sector—which suffered from a high export base effect from Q3 2017. GDP expanded 2.3% annually in Q3, down from Q2’s 3.3% but still slightly ahead of market expectations of 2.2%. On a seasonally-adjusted quarter-on-quarter basis, however, GDP growth inched up to 0.5% in Q3 from 0.4% in Q1.
This quarter’s growth print was characterized by significant weaker internal consumption and external demand dynamics, partly offset by a sharp rebound in total investment. Hampered by weaker consumer confidence in the quarter amid the escalation of the U.S.-China trade war, private consumption growth slowed to 2.6% year-on-year in Q2 (Q3: +1.9% yoy), its weakest showing in one-and-a-half years. Government spending meanwhile contracted 1.4% in the quarter, sharply contrasting the 5.8% annual growth logged in Q2.
Total investment, on the other hand, logged the best showing of this quarter’s reading, rebounding sharply to 17.5% annual growth after four consecutive quarterly contractions. It must be noted, however, that this strong performance was partly the consequence of a low base effect, after investment contracted markedly in Q3 2017. Although detailed investment data is not available in this advance release, Nomura analysts suggest a build-up of inventories could be behind the high growth figure, while construction-related investment is also likely to have picked up.
Lastly, the performance of the external sector deteriorated markedly in Q3 as exports softened while imports accelerated. Exports of goods and services grew only 1.4% annually in Q3, down from 6.3% in Q2, while growth in imports of goods and services inched up to 5.2% (Q2: +4.5% yoy). As a result, the external sector detracted 1.9 points from GDP growth in Q3, after contributing 1.7 percentage points in Q2.
Author: Joffrey Simonet, Economist