Taiwan: Export growth slows for the third consecutive month in August to a near standstill
September 7, 2018
Merchandise exports grew a paltry 1.9% in annual terms in August, decelerating from the 4.7% expansion registered in July and markedly below analysts’ expectations of a 5.1% increase. This is the third consecutive month in which Taiwanese exports slowed from the double-digit growth rates recorded at the beginning of the year, causing growth in the 12-month trailing sum of exports to fall from 11.7% in July to 10.7% in August. On a more positive note, Taiwan’s export orders rebounded in July, growing 8.0% year-on-year after a 0.5% contraction in June (previously reported: -0.1% year-on-year) and beating analysts’ previsions of 3.3%. Export orders typically lead actual exports by two to three months, and the July reading thus offers a glimmer of hope for a recovery of the Taiwanese external sector in September and early Q4. Moreover, new tech products are expected to hit the markets in the following months, notably Apple’s new iPhone models as well as new product launches ahead of Christmas, which should also contribute to export orders.
Nevertheless, the country’s export-oriented industries are extremely vulnerable to a further escalation of the U.S.-China trade dispute—the U.S. is currently mulling over a new round of tariffs on USD 200 billion of Chinese goods which could be applied as early as September—due to its deep integration in both countries’ supply chains for technology products.
According to Nathan Chow, an economist at DBS:
“Risks are on the downside, however, given the faster-than-expected slide in China’s manufacturing activities in July amid deleveraging pressures and trade-war uncertainties. The temporary factory shutdown in Taiwan’s TSMC, as a result of a computer virus outbreak earlier [in August], may also disrupt local production activities and cause a delay in export shipments.”
Looking at the details of export categories, results were mostly weak across the board. Exports of parts of electronic products—which constitute about a third of total shipments—decelerated markedly, as did exports of machinery and plastic products, while shipments of base metals contracted after registering near double-digit growth in July. On the other hand, exports of information, communication and audio-video products stabilized after contracting in July. In terms of export destinations, growth to Hong Kong and mainland China, which together account for nearly 60% of total exports, decelerated sharply, while exports to the ASEAN area contracted. Meanwhile, export growth to Japanese, European and U.S. markets accelerated somewhat.
Import growth moderated sharply from July’s 20.5% to just 7.9% yoy in August. This was driven by an across-the-board deceleration, with the exception of machinery imports growth which picked up somewhat. Growth of the 12-month trailing sum of imports inched up to 11.2% in August, from 11.1% in July.
Owing to a smaller import bill, the trade surplus reached USD 4.5 billion in August, up significantly from USD 2.2 billion in July. Meanwhile, the 12-month trailing trade surplus fell to USD 56.3 billion in August, from USD 57.5 billion in the 12 months up to July.
Author: Joffrey Simonet, Economist