Global orders for Taiwan’s products shrank for the 11th straight month in February, pointing to no let-up in sight for Asia’s struggling trade-reliant economies and cementing expectations that the island’s central bank will cut interest rates again this week.
With the persistent drag from exports weighing on industrial output, the government has already forecast the economy will contract in the first quarter, before recovering modestly later in the year.
Taiwan slipped into recession in the third quarter of 2015 but managed to post growth in the fourth quarter on a seasonally adjusted annualised basis.
Export orders in February fell 7.4% year-on-year, data showed yesterday, better than a 9.95% slide predicted by economists in a Reuters poll. In January, orders shrank 12.4% from a year earlier, the worst in three years.
Highlighting global weakness, orders from all of Taiwan’s major markets fell. China declined 12.1% and Japan slumped 26.1%, while the US and Europe fell 4.5% and 1.1%, respectively.
Orders for its seven major products also contracted, led by precision products which dropped 32.5% year-on-year due to weak demand for big flat TV panels and intensifying global competition, the ministry of economic affairs said. Information communications and electronics products were off 1.8% and 1.5%, respectively, it said.
“Export order momentum will return gradually,” said the ministry.
However, it expects first-quarter orders to contract year-on-year in part because China’s growth momentum remains weak.
Taiwan’s export orders are a leading indicator of demand for Asia’s exports and for hi-tech gadgets, and typically lead actual exports by two to three months. Taiwan is a crucial hub in the global supply-chain for tech giants such as Apple Inc.
Persistently weak external demand will add pressure on the central bank to cut its policy interest rate for the third meeting in a row this week.
Thirteen out of 14 analysts polled expect the central bank to trim the discount rate by 12.5 basis points (bps) to 1.50% on Thursday, while one thought it would be cut by 25 bps, a Reuters poll showed. “We expect the central bank to trim the interest rate by 12.5 basis point this week,” said analyst Woods Chen of Ta Chong Bank.  Taiwan recently cut its outlook for economic growth this year for the second time to 1.47% as weak global demand stunts exports, its main economic driver, and domestic consumption remains lacklustre.
It expected exports could shrink 2.78% this year.  Taiwan’s economic growth slowed to 0.75% in 2015 – the weakest since the depths of the global financial crisis in 2009 – from 3.92% in 2014.