Taiwan: Export growth strengthens in October on favorable base effect
November 7, 2018
Merchandise exports grew 7.3% in annual terms in October, picking up markedly from the 2.6% expansion registered in September, but nevertheless missing market analyst expectations of an 8.0% growth print. The acceleration was largely due to a favorable base effect compared to the same month last year, as there were three more working days in the month this year. Nevertheless, growth in the 12-month trailing sum of exports inched up from 8.7% in September to 9.0% in October. On the other hand, export orders in September—which usually lead actual exports by two to three months—increased 4.2% year-on-year (market expectations: +5.0%), down from 7.1% yoy in August. This indicates that momentum in the external sector should remain sluggish through year-end.
Looking at the breakdown by commodity, October saw a broad-based improvement across all categories: exports of machinery and parts of electronic products rebounded from their September contractions, while all other main commodities logged accelerating growth. Nevertheless, after accounting for the base effect, the underlying export growth trend appears to remain weak, as noted by Nomura analysts:
“seasonally adjusted exports fell by 7.2% m-o-m after a rise of 8.0% in September. Meanwhile, year-on-year growth in electronics parts exports (accounting for 34% of total in 2017) rose only slightly in October despite the base effect, suggesting weak sales of new iPhones could weigh on Taiwan’s manufacturing activity”.
In terms of regional segmentation, shipments to every key region also picked up, once again due to the base effect, but growth in exports heading to mainland China and Hong-Kong—Taiwan’s primary export market—remained much weaker than in H1.
Import growth meanwhile rose from 13.9% in September to 17.6% in October, due largely to a surge in imports of mineral products—notably petroleum—and electronic parts. Growth of the 12-month trailing sum of imports increased from 10.6% in September to 12.2% in October.
Lastly, the trade surplus fell sharply to USD 3.4 billion in October, from USD 4.3 billion in September. Meanwhile, the 12-month trailing trade surplus fell to USD 52.1 billion in October, from USD 54.0 billion in the 12 months up to September.
Author: Joffrey Simonet, Economist