Taiwan's export orders grew 5.9% in March

Thanks to low-base effect.

According to DBS, Taiwan's export orders grew less than expected by 5.9% YoY in March. Although the year-on-year growth rate has improved compared to the Jan-Feb average of 1.5%, the rise was only technical and helped by a low base for comparison – export orders contracted by -6.6% YoY in Mar13.

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A substantial recovery in export demand is not yet in place. Orders from the US and China continued to decline on the month-on-month basis in March, offsetting the demand increases from Europe and ASEAN. The correlation between exports and manufacturing output growth is typically high for the small and open economies like Taiwan.

March industrial production (due tomorrow) is projected to rise just 4.3% YoY, compared to 2.6% on average in Jan-Feb. The 1Q GDP (due next week) is expected to print a modest growth of 3.1% YoY, versus 2.9% in 4Q13.
Fortunately, indicators for domestic demand were stable. Capital goods imports have maintained an upward trend as of March (14.6% YoY), suggesting that manufacturers have remained confident about the demand outlook and continued to increase investment spending.

Meanwhile, the impact of the recent student protest has been moderate thus far. Consumer confidence dropped only slightly by 1.9ppt in March.

The TAIEX recouped its loss quickly. The current situation remains complicated and uncertain however, given that the cross-strait services trade agreement is still pending in the parliament, the opinions about establishing an oversight mechanism for cross-strait negotiations remain divided, and a local election is scheduled for the second half of this year. Political risk and its impact on the economy still warrant close monitoring.

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