Taiwan August export orders likely to turn positive for first time in 17 months

Export orders in Taiwan are expected to turn positive for the first time in 17 months during August as orders for semiconductors and other electronics components are expected to pick up, owing to rising demand in the iPhone supply chains.

The year-on-year growth rate of export orders are expected to register 0.1 percent, while demand from China and Hong Kong is likely to stabilize, given that the latest economic data out of China have improved on the broad basis (e.g., retail sales, industrial production). In addition, the base effect is favorable for August, given the sharp contraction in export orders incurred during the same period last year at -8.3 percent.

While an exports-driven recovery appears to be underway in Taiwan, the momentum remains very weak. Manufacturing PMI, for instance, has stayed above the neutral 50 for three consecutive months as of August this year, although at a level as low as just 50-51.

In retrospect, PMI had surged to 54-56 during the Jun-Aug period, ahead of the release of iPhone 6. Back then the strong rise in electronics demand had boosted Taiwan’s GDP growth to 5 percent q/q, on a seasonally adjusted annual rate (saar) during the third quarter of 2014. This time, considering the overall weakness in external demand and uncertainties in the global economy, GDP growth for 3Q16 is expected to remain modest at 2-3 percent q/q saar, DBS reported.