April Business Indicators Slip to "Blue" to Show Potential Weakness in Taiwan's Economy

The National Development Council (NDC) of Taiwan's Cabinet or executive ministry announced the island's economy had been on a downtrend throughout this April based on the council's nine major business indicators that showed “blue” to point to a slowing of the general indicator.

The “blue” signal has hit Taiwan's economy the first time since September 2012 as a result of the total score of the general indicator dropping six points from this March to 16, the worst score since the 2008 global financial crisis, according to the council.

The council ascribed the April result mostly to the disappointing growth rate of global and American economies, as reflected in the decline of the Indian stock market, coupled with jitters from the Greek debt issue, plus the slowdown of global market for mobile computing devices, which have hamstrung Taiwan's exports and industrial output.

In spite of the disappointing April result, senior NDC officials are optimistic toward the chances for the island's economy to recover to the 23-17-point-range to signal “yellow-blue” in May on its business monitoring scale since the April score is but for that single month. Moreover, they feel the global economy would improve in the second half of this year based on forecasts by several local institutes that the island's exports will rally in the second half when global demand strengthens, with the second half being typically a peak season for the information technology and communication sector, which has to meet rising consumer demand that builds during the Christmas and holiday season.

According to the council, Taiwan's exports have been declining since early this year due to weak global demand and some industrial sectors even posting double-digit declines in exports. The Customs Office's statistics show that the island's exports signaled “blue” in March and April.

The council's officials point out that such tepid exports should ring alarm bells because the decline was unlikely triggered by seasonal factors. Given Taiwan's export-oriented economy, anemic exports definitely undermine earnings of local manufacturers to impact forex revenues, as well as perhaps yearend bonus for all the workers to hurt local consumer confidence, the council's officials stress.

The council's recent surveys show that local manufacturers are more cautious about the outlook of Taiwan's economy than before and uncertain about business in the second quarter in light of the weakening domestic economy.

When questioned by a legislator about his perspective on the island's export prospect in the second half of this year, Economics Minister C.C. Deng admitted to having noted the 11.7 percent month-on-month contraction in the island's total exports in April, and that he has instructed the ministry's Industrial Development Bureau and Bureau of Foreign Trade to come up with proposals to help the island's backbone industries boost exports and the island's manufacturers expand exports to developing economies as India, Brazil, and Southeast Asia.

Some industry executives feel when U.S. Fed raises interest rate sometime this year, which it has not confirmed and would act according to upcoming economic figures, the New Taiwan Dollar will devalue against U.S. dollar to thereby make Taiwan's exports more competitive to help local suppliers.