Taiwan March exports fall, raising chance of Q1 GDP contraction

Taiwan's exports fell more than expected in March, increasing the chances the trade-reliant economy did not escape a third straight year-on-year contraction in the first quarter. The island's exports, considered a gauge of global demand for gadgets world-wide, in March had their 14th straight month of decline. The drops have been double-digit since June last year as global economies, particularly China, slowed.
"Taiwan's trade with China is doing very badly," said Iris Pang, a senior economist at research firm Natixis. March's 11.4 percent fall in exports from a year ago was steeper than a 9.6 percent retreat seen in a Reuters poll, and only a fractional improvement from February's 11.8 percent drop. First quarter exports were 12.1 percent below January-March 2015.
Exports in the second quarter will also contract, but the fall could be a single-digit percentage, said Yeh Maan-tzwu, the statistics chief for the finance ministry, which issued the data on Monday. The government in mid-February forecast that on an annual basis, the economy likely would shrink 0.64 percent in the first quarter, the third straight quarter of year-on-year fall. Preliminary first quarter economic data will be announced on April 29.
Exports to China, Taiwan's largest trading partner, fell 14.2 percent in March, steeper than February's 13 percent contraction. "The global economic outlook is unclear while industry competition is intensifying," the ministry said, adding that China's aims to become self-sufficient in its supply chain are "all interfering with Taiwan's exports prospects."
In March, Taiwan's exports to other key trading partners showed mild improvements, though shipments to the US and Europe still fell, albeit at a slower pace. Imports fell 17 percent from a year earlier, their biggest drop in five months. March had a trade surplus of $4.5 billion, above the poll's $4.29 billion and the highest since October. Data released so far on March reinforces expectations that Taiwan's first quarter was weak. Wholesale prices last month were nearly 5 percent below a year earlier, even though consumer prices were about 2 percent higher.
Pang said that deflation in wholesale prices "highly likely" points to a March contraction in industrial production, which will be announced on April 22. Natixis is forecasting another 12.5 basis point cut to Taiwan's policy discount rate this year. Between September 2015 and last month, the central bank made three consecutive interest rate-cuts of that size, lowering the key rate to 1.5 percent.