Data released earlier in the day showed that Taiwan's Industrial production fell 5.7% y/y in January (Dec: -5.9%; Nov: -4.8%; Oct: -6.3%), better than consensus (-6.1%). On a m/m basis, industrial production extended the weak underlying trend, stayed in contraction for a third straight month, following two consecutive months of small expansions (Jan: -0.5%; Dec: -0.3%; Nov: -0.02%).
The still soft headline came despite having one more working day this January and a more supportive base last year. On a q/q basis, industrial production turned positive in January for the second month in a row, but it looks doubtful if the trend could be sustained.
It is however to be noted that the Taiwan (NDC - National Development Council) PMI climbed back to 51.3 in January, from 46.6 in December and after posting contractionary readings for the past six months (below 50). The improvement in the NDC PMI likely reflects the frontloading of production ahead of the Lunar New Year holiday, rather than a sustained rebound, noted Barclays.
"We continue to look for more convincing signs of stabilization. Given that leading and flash indicators of external demand in the region continued to worsen in February, we expect the softness in Taiwan's manufacturing to persist." adds Barclays
