Taiwan: Exports post sharpest contraction in nearly three years in February while orders continue to spell gloom ahead
March 8, 2019
Merchandise exports fell 8.8% in annual terms in February, logging the fourth consecutive month of decline after January’s 0.3% dip. Furthermore, the print markedly disappointed market analysts, who had foreseen a milder 0.9% decline, and marked the sharpest contraction in nearly three years. February’s results reflected the ongoing feebleness of the trade sector, battered by a lull in the tech cycle and the U.S.-China trade dispute. Indeed, China’s exports in the month also tumbled the most in three years.
However, the February reading was also likely weighed by seasonal calendar effects due to the Lunar New Year holiday. Therefore, looking at the data for January-February combined—which shows a 4.1% contraction compared to the same period in 2018—may yield a more accurate picture of trade dynamics. Nevertheless, export orders, which usually lead actual exports by two to three months, suggest the picture will likely remain grim in coming months, as they tumbled by 6.0% (year-on-year) in January after a staggering 10.5% contraction in December. Meanwhile, imports tanked 19.7% yoy in February after a 6.8% increase in January, bringing the January-February print to a 4.8% fall.
As has been the case in recent months, the print was led by lower shipments of parts of electronic products—which account for just under a third of Taiwan’s total exports—while exports of base metals as well as plastics and rubber sharply contracted for the third month in a row. Moreover, machinery exports also tumbled in February after holding steady in previous months. On the flipside, exports of information, communication and video products continued to grow robustly. Looking at regional segmentation, exports to all main trading partners contracted excepted for U.S.-bound shipments. Contractions were steepest for mainland China, Hong Kong and the ASEAN region, which represent the destinations of over half of total exports, as well as Europe.
Growth of the 12-month trailing sum of exports fell from 4.7% in January to 4.1% in February, while growth of the 12-month trailing sum of imports fell from January’s 9.2% to 7.8% in February. Lastly, the trade surplus rose to USD 4.9 billion in February, from USD 3.1 billion in February 2018 (January: USD 0.9 billion), while the 12-month trailing trade surplus rose from USD 47.6 billion in January to USD 49.7 billion in February.
Author: Joffrey Simonet, Economist