Taiwan exports are likely to decline following weakness in industrial production amid slowed export orders and a slackening purchasing managers’ index. All these indicators point towards that export shipments will fall at a faster pace in May than that in April.
A year-on-year decline of -7.6 percent is expected to be seen in exports, worse than the -6.5 percent in April, 2016, DBS reported.
Lack of Chinese demand has heavily weighed on Taiwanese trade so far this year. Demand from the mainland is expected to remain at depressed levels through the rest of this year as the Chinese economy heads towards an L-shaped recovery.
Headline consumer price index eased to 1.2 percent y/y, marking the third consecutive month of decline compared to the peak of 2.4 percent in February. Food prices continued to normalize after being influenced by the abnormal weather earlier this year. While a seasonal rebound in vegetable and fruit prices is possible during the upcoming summer, core inflation is expected to remain stable and benign amid weak domestic demand and soft labor market conditions, reports suggested.
Against a backdrop of prolonged weakness, the central bank of Taiwan is expected to continue easing monetary policy.
“We look for a 12.5bps rate cut at the upcoming meeting on 30 Jun,” DBS said in a research note.
Meanwhile, deteriorating chances of a June Fed rate hike signal greater flexibility for the Taiwanese central bank.
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