Taiwan industrial production pegged at 0.1%

Blame it on the weaker than expected export orders data.

According to DBS, industrial production for August is expected to remain stagnant at 0.1% YoY (0% in July). Judging from the weaker than expected results in export orders data in August (-1.6% MoM sa), the risks to our industrial production forecast are actually on the downside.

Here's more from DBS:

Although export demand from China rose by 3.1% in August, orders from Europe fell sharply by -7.5% to offset. The overall external environment remains fragile, posing challenges to the export-dependent economies like Taiwan.

Domestic consumption demand also appears lackluster. Consumers’ real purchasing power has deteriorated in recent months, as inflation rose significantly (2.9% in Jul-Aug) and outpaced the growth in nominal incomes (1.9%). Meanwhile, there is no stimulus from fiscal or monetary policy expansion.

The government’s “stimulus” package announced earlier this month focused on the long-term objectives of maintaining volume competitiveness, rather than increasing fiscal support to the domestic economy in the short term. The central bank also kept rates unchanged at the 3Q monetary policy meeting held last week.

The only positive is that the stock market has rebounded on the back of the improvement in US investor sentiment boosted by QE3. Yet, sustainability remains a question mark, given the continued sluggishness in the real economy.