Taiwan November IP: Sequential improvement continues

Taiwan's industrial production fell 4.94% y/y in November, which was better than expected (consensus: -5.55%) However, there was a minor downward revision for October, to -6.3% from -6.2% (Sep: -5.5%). The headline number was also weighed down by elevated inventory levels as well as temporary refinery suspensions, which led to lower petroleum refining activity in November, compensated by one extra working day.

On a seasonally adjusted basis, November IP posted a third consecutive positive print, but the momentum of improvement is starting to moderate at the margin. Production rose by 0.1% m/m sa following a 0.5% gain in October (September: 0.3%). This is mirrored in relatively modest festive demand this year, which has weighed on production amid still-elevated inventories and increasing concerns about geopolitical events. 

However, the positive news is that inventory levels are continuing to show signs of clearance, as shown in the moderate fall in the inventory to shipment ratio, which dipped to 1.16x in October from a post-crisis high of 1.25x in August. As inventories continue to get cleared, a sequential improvement is expected in activity, supported by stabilising demand conditions in China and the US.