Taiwan’s Apr industrial production shrink as overseas demand extends fall

Taiwan’s industrial production shrank deeper in April as overseas demand continued to fall, with sharp contraction in export orders. The contraction in Apple’s earnings, reflected in lesser iPhone sales led to the further decline.

As per data released on Monday, industrial production fell 4.1 pct y/y, deeper than the 2.9 pct fall in March. However, on a monthly basis, output fell 0.8 pct in April, highly offsetting the 1.3 pct rise in March.

Taiwan’s export outlook deteriorated even further, with the decline in iPhone sales, Apple being a major trade partner for Taiwanese electronics industry. Adding to the concerns is that China’s economic data softened in April after a temporary rebound in March. The Chinese authorities recently signaled the intention to accept an L-shaped recovery, which dampens the hope for a stimulus-driven recovery in Chinese demand in the short term, DBS reported.

Export orders contracted sharply in April 2016 by 11.1 pct y/y, with electronics components declining 9.8 pct and information & communication products falling 10.0 pct.

The outlook for domestic demand is also lackluster. Retail sales rose modestly to 2.3 pct y/y in Apr16 from 1.1 pct in Mar16, but still lower than the Jan-Feb16 average of 3.6 pct. The seasonally-adjusted unemployment rate has started to inch upward since the beginning of this year which weighs on consumers’ confidence and capabilities to spend.

The initial assessment of gross domestic product on year has been projected to be only marginally above Q2 2016. The full-year growth is also assumed to miss forecast, with the risk of falling below 1 pct.

"A rate cut at June’s central bank meeting now appears a done deal. And the possibility of further rate cuts in 2H16 is no longer ruled out," DBS mentioned in a research note.