Mountain of evidence reveals thriving Taiwan exports

Export growth sharply rose to 9%.

According to DBS, the rise in December exports offered further evidence that Taiwan has entered the early expansion phase in the economic cycle. Export growth accelerated significantly to 9.0% YoY (2.3% MoM sa) in Dec12 from 0.9% in Nov12.

The monthly numbers of export growth, albeit volatile, have shown continued rises for two months. Export orders, a better indicator for the underlying trend in external
demand, have been climbing for four straight months.

Meanwhile, capital goods and consumer goods imports both picked up in Dec12, although the uptrend was not yet established. With export demand continuing to improve, a recovery of investment in the export-oriented manufacturing sector is likely to follow subsequently.

Here's more from DBS:

We maintain our GDP forecast of 4.2% for 2013 (above-consensus), compared to last year's growth of about 1%.

On the price front, CPI inflation remained stable at 1.6% YoY in Dec12, in contrast with our expectation for a further slowdown. The downward trend in food prices has come to an end earlier than expected, as agricultural supply has fully recovered from the weather disruptions in 2H12.

We continue to expect inflation to ease to 1.3% on average this year, down from 1.9% in 2012. This considers the lagging impact of the slowdown in aggregate demand in 2012 and lingering weakness in the labor market.

Meanwhile, the policy-induced inflation pressures resulting from the government's fuel/electricity price hikes last year will dissipate. The hiking of energy prices in 2012 was a self-imposed reform move. The fiscal pressures caused by energy subsidies remain manageable.