Taiwan’s industrial production output slows slightly in July, exports to recover in Q4

Taiwan’s industrial production slowed a bit in July. Industrial production growth slowed to 2.4 percent year-on-year from 3.5 percent in June. However, it is still higher than the second quarter average of 1.4 percent, noted DBS Bank in a research report. On a month-on-month basis, production dropped to a decline of 0.1 percent from the previous month, a small technical payback from the 2.8 percent rise in June. It is evident that the Taiwanese manufacturing sector is in the expansionary mode.

The Nikkei PMI was above the neutral level at 53.6 in July. The surveys conducted by the economy ministry showed that the movement of production index in the manufacturing sector rose to 54.4 in July, the highest in over five months. This implies a good chance that industrial output would rise on the month-on-month basis in August.

Indeed, the power blackout of 15 August has impacted public confidence and boosted concerns about the island’s long-term investment environment. However, the immediate effect on August industrial production should be limited, stated DBS Bank. The media reports showed that the operations and shipments at the major electronics companies were not impacted by the power outage materially.

From the demand-side perspective, exports continue to be a vital driver for the manufacturing sector. This week’s data indicated that export orders rose 10.5 percent in July, a slower pace than 13 percent in June, but better than the second quarter average of 9.9 percent. The slowdown in July was greatly ascribed to electronics orders. According to DBS Bank, exports are likely to recover in the fourth quarter as the iPhone demand increases and global economic rebound continues to proceed.

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