Taiwan’s export orders surprisingly shrank in June, which an official called “unusual” and some analysts said could mean the US-China trade war is casting a shadow over the island’s second half growth outlook.
Orders for trade-dependent Taiwan fell 0.1% from June 2017 to $40.31bn, Ministry of Economic Affairs data showed yesterday.
The decline – a big reversal from May’s robust 11.7% rise – was the first since February, which had a 3.8% drop related to the timing of this year’s Lunar New Year holidays and not the trade dispute between the United States and China.
Prior to February, the last time that Taiwan export orders shrank was in July 2016.
Taiwan’s export orders are a leading indicator of demand for Asia’s hi-tech gadgets and other shipments, and typically lead actual exports by two to three months.
A Reuters poll had forecast a June increase of 5.9 %, and no participant predicted a contraction.
When announcing May export orders, the government projected it projected June would see a 2.8%-5.3% rise.
Calling said June’s contraction “unusual”, ministry official Lin Li-chen said “don’t be led to be pessimistic on the future, because the global economy is extending its growth, it isn’t taking a sudden unfavourable turn.”
She did not comment on the US-China trade fight.
Betty Wang, Hong Kong-based senior economist from ANZ, said that with the US-China trade dispute, there’s a possibility that there was some frontloading of orders in May, “so now the drag effect has been reflected in data for June and in coming months due to the tariffs.”
Overall, exports “may weigh down on Taiwan’s growth outlook in second half,” Wang said.
But Johnny Jiang, an analyst with Masterlink Securities Corp, said he believes the June shortage reflect a high-base effect from a year earlier, when Taiwan benefited from the iPhone inventory build-up.
“It’s expected that the negative turn in June is only a one-month effect, even though the second half still faces a high base period,” Jiang said. “We expect export orders will still maintain single-digit growth.”
However, another securities analyst, insisting on anonymity, said “Under the shadow of the US-China trade war, it will be difficult for Taiwan’s economic growth to be strong.”
Orders from the United States, where Apple Inc is a major customer for major Taiwanese technology component makers, fell 4.3% in June from a year earlier.
Those from China, the island’s biggest trading partner, increased 5.8%.
Orders from the European Union and Japan fell 0.5% and 2.3%, respectively.
Export orders for communications products fell 7.6% from a year earlier.
The ministry said it expects July’s export orders to grow between 0.7% and 3.3% from a year earlier.