ECONOMY | Staff Reporter, Taiwan

Taiwan’s export order growth plummets to 5.3% in August

DBS blames weaker demand from Europe and the US, as manufacturers have cut orders amid rising concerns over the debt crisis.

August industrial production is also expected to show slow growth of about 4%.

Here’s more from DBS:

There are signs that the real economic sector has been affected by the global financial market turmoil in August. Export orders registered 5.3% YoY in August, significantly down from July’s 11.1%. On the sequential basis, the volume of export orders dropped -4.0% MoM sa, reversing the 2.4% rise in the preceding month. The decline in August was mainly attributed to weaker demand from Europe (-8.3% MoM sa) and the US (-4.5%), as business sentiment has deteriorated and manufacturers have cut orders amid growing worries about sovereign debt crisis.

Taiwanese exporters are relatively vulnerable among the regional peers, because of their reliance on the contract manufacturing model and the concentration on the cyclically-sensitive electronics sector.

The weakening of August export orders points to weakness in actual exports and industrial production in late-3Q/early-4Q. August industrial production is expected to show single-digit growth of about 4%. The export-related industrial activity will most likely remain weak in September but may not repeat a plunge. The future growth path will largely depend on how financial markets will evolve and whether policymakers in Europe can credibly address sovereign debt issues to prevent a global economic downturn.

The disappointing results of August export orders are posing risks to our interest rate forecast for next week’s central bank policy meeting. We forecast a modest rate hike of 12.5bps, while recognizing a 40-50% probability of a rate pause.



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