Taiwanese export orders drop year-on-year in June, export likely to weigh on growth in H2 2018

Taiwanese export orders fall in in June on a year-on-year basis. It dropped 0.1 percent in the month, as compared with an 11.7 percent rise in the prior month. The fall in export orders was mainly because of a deceleration in orders in the electronics sector and a comparatively high base. Export orders for electronic products fell 0.2 percent, while information and communication products decelerated from May, due to sluggish demand for laptops and smartphones and unfavorable base effects. But, traditional sectors such as base metals, chemicals and plastic articles still exhibited modest growth. In terms of export market, orders from Mainland China and Hong Kong and U.S. softened from May.

The deceleration is expected to continue in the months ahead, posing a drag on Taiwan’s second half of GDP growth, noted ANZ in a research report. The likelihood that the strains from China-US trade tensions have started to manifest themselves in the hard data cannot be excluded. According to Taiwan’s Ministry of Economic Affairs expects export orders growth to decelerate to 0.7 to 3.3 percent year-on-year in July.

“We expect export performance to be a drag on Taiwan’s GDP in H2 2018. Thus, we maintain our forecast of 1.7 percent y/y for full year GDP growth”, stated ANZ.

The June softness indicates a possible downtrend in the region’s trade as Taiwan’s export orders have been a bellwether of the export performance of other economies. A fall in Taiwan’s export orders could suggest a fall in regional exports in the near future, partially due to China-US trade tensions. This, along with the cyclical downturn in the electronics sector, is expected to inflict collateral damage on regional economies like Taiwan, which are major supplier parts and components to China.