Gloomy Conditions Persist
Final numbers for the fourth quarter of 2015 showed that the economy had contracted by 0.52% for the second consecutive quarter of negative growth, verifying pessimistic forecasts that Taiwan had officially entered recession. The third quarter decline was calculated at 0.80%. According to the Directorate General of Budget, Accounting and Statistics (DGBAS), Taiwan still managed to eke out growth of 0.75% for the full year thanks to the strong 4.04% start in the first quarter and positive if anemic second quarter growth of 0.52%. The 0.75% was a far cry from the 3.75% growth forecast by DGBAS at the start of last year.
Exports, equivalent to 70% of Taiwan’s entire economy, declined in January in yearly comparisons for the twelfth straight month, falling by 13%. China’s slowdown is the most commonly cited reason for the drop, as shipments to China and Hong Kong, which together take some 38% of the island’s exports, were down by nearly 20% in January from a year earlier. But as exports to China consist heavily of electronic components and other commodities that are ultimately re-exported to the global market, the slowdown is more a barometer for the entire global economy. China’s Purchasing Manager’s Index (PMI) – a leading indicator of the health of the manufacturing sector – fell for the sixth straight month to 49.4%, indicating pessimism. Curiously, Taiwan’s own PMI ended seven months of decline by rising 4.6 percentage points to reach 51.3%, entering what is considered expansionary territory, according to the Chung-Hua Institution for Economic Research (CIER). The think tank regards domestic demand as the key driver and suggests that it might be an isolated phenomenon rather than the start of a trend, as most other economic drivers are gloomy.
Export orders received in January came to US$34.2 billion, providing no indication that the long slump in exports was nearing an end. The US$34.2 billion, in fact, was the lowest level for any month since 2010 that did not coincide with the Chinese New Year holiday break.
The poor export performance inevitably was also reflected in industrial production levels. The industrial production index declined by 6.17% year-on-year in the month of December, and was down by 1.66% for the full year 2015.
Consumer prices continued to be generally stable. The Consumer Price Index (CPI) was up by 0.14% year-on-year in December, but for the full year was 0.31% below the previous year, primarily due to the drop in international oil prices. Consumer confidence continued its decline to 80.89, down from 81.61. Taiwan’s consumer confidence is tracked by National Central University’s Research Center for Taiwan Economic Development (RCTED) on a scale of 200 points. Anything below 100, which the survey has never exceeded, is considered pessimistic.