Taiwan's industrial production dropped 3.3%

External demand outlook disappointed investors.

According to DBS, following the unexpected drop in March export orders, industrial production for March (released yesterday) also fell -3.3% YoY (-2.6% MoM sa), deteriorating from +3.7% YoY in the first two months of this year. 

Here's more:

The average growth of industrial production in 1Q13 posted 0.8% YoY, a significant slowdown compared to 4.2% in 4Q12. This implies a high chance that the preliminary estimate of 1Q GDP (due next week) will show a notable drop to the mid-2% level, down from 3.7% in the preceding quarter.

The external demand outlook is not as strong as many investors had anticipated at the beginning of the year. The G2 economy still faces fundamental problems of public sector deleveraging.

The cyclical recovery in China also remains slow and tepid. The main driver to Taiwan’s 1Q growth should come from domestic investment.

This was aided by the recovery in capacity utilization amongst manufacturers, the property market upturn thatspurred construction investment, and the government’s policy incentives that boosted investment flowsfrom offshore Taiwanese firms.