Taiwan's export growth dropped 6.6%

Blame it on weak demand from the US and Europe.

According to DBS, yesterday’s export orders data (March) were rather disappointing. The YoY growth fell unexpectedly by -6.6%, far below the consensusforecast of 1.8%.

Here's more:

In the MoM (sa) terms, export orders also dropped by -4.3% in value, or-3.1% in volume. Demand from the US and Europe fell particularly sharply by -5.1% (MoM sa) and -8.5% respectively. Orders from China and Hong Kong rose only slightly after the Chinese New Year holiday in February (+1.4%).

This increases the concerns about the outlook of external demand recovery, in the context that the G2 economy still faces fundamental problems of public sector deleveraging, while the cyclical recovery in China remains slow and tepid.

Demand from Japan also dropped -2.5% in March. Thatsaid, it might be premature to ascribe thisto the yen’s depreciation, which prompted Japanese firmsto reduce imports and shiftto domestic substitutes.

In fact, orders received from Japan have been trending down persistently eversince 2010, in large reflecting the sluggishnessin Japan’s domestic demand. Regarding the competition with Japanese exportersin the international market,there is also insufficient evidence that Taiwan’s marketshare has been squeezed by the Japanese rivals.

As of March,Japan’s export figures only showed a pickup in the yen-denominated export value, with export volumesremaining stagnant. The continued deterioration in March export orders dampened the expectations of a resilientrebound in industrial activity afterthe CNY holiday.  

Given the disappointment in March orders, industrial production for the same month (due today) may also post slightly negative numbers, below the consensus estimate of 1.8% YoY. The weaker-than-expected performance in the export sector poses downside risksto 1Q growth results and also the 2Q outlook.