Taiwan's 1.6% inflation beats market expectations

Thanks to food prices taking a deep dive.

According to DBS, the external trade data for November are due tomorrow. Export growth is expected to rise to 7.3% YoY, up from 4.3% on average in the preceding two months.

Here's more from DBS:

Export orders growth has accelerated to 3.2% YoY in October from 1.9% in September, which points to a gradual improvement in the external demand outlook.

Orders from China have started to pick up. Demand for precision instruments was particularly strong, while products including electronics, chemicals and plastics & rubbers also saw a modest rebound in overseas demand.

A moderate recovery in exports is expected to be sustained in the next 2-3 quarters, on the back of a cyclical upturn in the Chinese economy. Meanwhile, note that the Taiwan dollar has fallen 5% against the Korean won compared to the recent peak in mid-2012.

A weaker TWD/KRW rate could help the competitiveness of Taiwanese exporters in the high-tech industry.

On the price front, November’s CPI inflation came in lower than expected at 1.6% YoY, due to the faster-than-expected declines in food prices. Imported inflation
remained a non-issue, thanks to the appreciation of the TWD against the USD and the JPY.

Import prices growth stayed negative at -6.4% YoY in November and WPI inflation fell -3.9% YoY. Overall, the macro picture is improving as a result of the slowdown in inflation and the recovery in external trade.

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