Taiwan’s first industrial output fall in 2.5 years sign ‘Asia is slowing down’, with ‘darker picture’ ahead
- Taiwan’s industrial output index lost 4.8 per cent last month compared to a year earlier following 31 months of year-on-year growth
- Production in South Korea and Singapore has also eased due to weak consumer demand caused by the war in Ukraine, high inflation and fallout from China’s zero-Covid policy
Taiwan’s industrial output fell for the first time in more than two and a half years in September, signalling trouble in major world markets that traditionally rely on the technology hardware hub as well as for other export-reliant Asian economies.
The self-ruled island’s industrial output index lost 4.8 per cent last month compared to a year earlier following 31 months of year-on-year growth, according to Ministry of Economic Affairs data released on Monday. The index also fell by 6.31 per cent compared to August, the ministry said.
Declining output signals economic softening in the third and fourth quarters for export-reliant Taiwan due to consumer hesitation in the world’s biggest countries, analysts said, with other Asian exporter economies feeling the same pinch.
“Asia is slowing down,” said CIMB Private Banking economist Song Seng Wun, pointing to less overall demand for electronics compared to phases during the coronavirus pandemic when remote working and home study were more common.
“Consumers don’t need to update their smartphones or upgrade their laptops any more, so you don’t get the big purchases as before.”
“Taiwan’s industrial production surprised on the downside,” said Heron Lim, an economist with Moody’s Analytics.
“The seasonally adjusted data presents a darker picture … suggesting that industrial production is contracting faster due to a lack of orders in the global market.”
Orders from Taiwan’s biggest buyer, mainland China, reached US$11.55 billion last month, tumbling 27.9 per cent year on year.
Output for Taiwan’s liquid-crystal displays used primarily for monitors and gaming devices declined the most year-on-year at 21.86 per cent, according to the ministry.
The data showed that overall electronic component output rose by 9.72 per cent, with semiconductor sales remaining stable after supply shortage of the past two years, according to analysts.
Taiwan is set to release its third quarter gross domestic product (GDP) data on Thursday, with the US$760 billion economy expected to have grown due to a domestic consumption rebound in August after its virus caseloads peaked, said Tony Phoo, a Taipei-based economist with Standard Chartered Bank.
Investment banks are forecasting a near 3 per cent GDP growth between July-September, consistent with the Taiwan government’s full-year prediction of 3.76 per cent expansion.
Taiwan’s economy could remain stable until the end of the year as the giant Indian market continues to expand and some data from the United States bodes well, said Woods Chen, the head of macroeconomics for the Taipei-based Yuanta Securities.
Economic data in late 2022 also may look weak because of unusually high comparative figures released in the second half of last year, economists said.
But Taiwan’s economic growth could slip in the second half of the year because of increasing “global risk”, Phoo said.
“The recent data in terms of September industrial production shows that the extended outlook is increasingly negative from a Taiwan perspective,” he said.
“Taiwan is very geared toward semiconductors and tech, so if semiconductors and tech are looking softer ahead, then there’s no doubt Taiwan growth will slow as a result.”