Taiwan: Industrial production surprises to the downside in April
May 23, 2017
Industrial output unexpectedly declined by 0.6% in annual terms in April, weighed down by a sizeable deceleration in the production of electronic components and decreases in the output of computers, electrical equipment and chemical materials. This contrasted the 3.7% increase recorded in the previous month and confounded market analysts, who had expected output to expand 4.0% in April.
April’s drop, the first since July 2016, reflected deteriorating dynamics in the manufacturing sector, which accounts for 93% of overall industrial production. Electronic parts and components, the largest single industry in the manufacturing sector, decelerated markedly in April on the back of seasonal weakness and inventory adjustments across firms. Chinese demand for Taiwanese smartphones slumped after the Lunar New Year, while the transition towards new products—the iPhone 8 launch will buttress manufacturing output in H2—is still in its infancy. Other industries, including chemical materials, computers and electronic products and electrical equipment fared even worse, driving the manufacturing sector to a mediocre 0.8% year-on-year expansion in April (March: +5.2% yoy).
A sequential comparison confirms the bleak reading. Industrial production shrank 2.5% over the previous month in seasonally-adjusted terms in April, a contrast to the revised 0.3% increase in March (previously reported: +0.1% month-on-month).
Even though April’s result came as a surprise to many, economic tailwinds remain largely in place and continue to support Taiwan’s growth trajectory. Annual average growth in industrial production rose from 3.9% in March to 4.2% in April, the highest level since July 2015.
Author: David Ampudia, Economist