Taiwan industrial production to slip 1.4%

Blame it on export orders contracting 4.4%  with the weak performance in global economy.

According to DBS, the economic data for July including export orders, industrial production, retail sales and unemployment rate are the focus this week. These numbers will likely paint a picture of weak growth in 3Q. Export orders, already released yesterday, contracted -4.4% YoY. Sequentially, growth (MoM sa) in export orders was stagnant, at only 0.1%.

Here's more from DBS:

This is in line with the weak performance in global economy and in the electronics industry. July PMIs in China, US and Europe remained well below the neutral levels. And the US semiconductor book to bill ratio has dropped to a 7-month low of 0.87 in July.

Domestic demand also appears lackluster. Consumer confidence slipped 1.3ppt in July, largely caused by the deterioration in the stock market prospect. This is despite that the labor market has remained stable so far, thanks to job creation in the tourism related services sector that offset the slowdown in manufacturing.

On the supply side, industrial production should continue to show a high correlation with export orders and export . July industrial production is expected to post a decline of -1.4% YoY (vs. -2.4% in June). A weak output growth in July, if confirmed, will bode ill for the GDP outcome in the third quarter. Note that the government has further lowered its annual growth estimate to 1.66% from 2.08% on August 17th, cutting the forecast for 2H12 by 0.8ppt. The market consensus forecast currently stands higher than the official estimate, at 2%. A downgrade is likely to follow.