Exports fall, presaging slower second half

A beautiful bride-to-be being done up for the traditional wedding photographs.

The Taipei Times reported:

The nation’s exports fell 9.7 percent from a month earlier to US$27.88 billion last month because of weaker seasonal demand for Taiwanese electronics and the shutdown of several plants at the sixth naphtha cracker complex, the Ministry of Finance said yesterday.

However, exports still grew 10.8 percent last month from a year earlier, with exports surging 16.9 percent year-on-year to US$154.14 billion in the first six months, the strongest level ever, the ministry’s data showed.

Exports fell from May to June this year, 9.7%. Compared to last June they are still up 10.8%. The report noted that imports also reached all-time highs, causing a fall in the trade surplus, but much of the rising tide of imports consisted of capital imports, implying that makers are purchasing machinery to make more stuff. Yay!

The Taipei Times article noted differing views -- the second half of the year could be good if Japanese reconstruction starts, China maintains, and the US grows. However, the US economy doesn't seem to be headed for spectacular growth, as its leaders would rather burn the Middle East than make America grow. The Financial Times column Beyond Brics put Taiwan's export decline in a global context:

Solid evidence in Taiwan’s latest export numbers of a worrying slow down in world trade.

Economists warned earlier that Taiwan’s strong export growth couldn’t continue forever, and that the second half of the year was likely to present a much tougher environment than the first.

And on Thursday they were proved right, with Taiwan’s June export numbers showing exports falling 10 per cent compared to May, and up just 10 per cent compared to June 2010.

Exports traditionally fall from May to June, but some economists were still caught off guard – The median growth rate forecasted by eight economists surveyed by Dow Jones was 19.6 per cent.

The slowdown is a repercussion of a global slowdown -- China's numbers are expected to show a slowing economy as well. FT pointed out that Taiwan's machinery exports fell 13.3%, implying that the tightening of credit in China is hitting purchases of production machinery from Taiwan.

How will this affect the election? I expect a second-half slow down will have very little effect, for two reasons. First, the pro-KMT media was able to create the feeling of economic slump among voters despite economic growth above 4.5% for the period 2006-2008 during the run-up to the election. Hence, I expect that the pro-Blue media will be able to blunt the effect of economic slowdown, unless it is truly awful. Don't forget that the foreign media is Taipei-centric and frequently recirculates KMT talking points as if they were serious analysis, validating the local media. Second, voters in the local election choose on purely local issues such as development projects and clan and patronage networks, while at the national level core voting groups are probably already set. Only the ten percent swing vote remains to be captured, and this educated group will not be much influenced by transient economic changes.
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Daily Links:

• The Economist's Jane Rickards writes on the LTH indictment, musing on the use of secret funds for diplomatic missions.
• Richard Bush's remarks on the existence of the ROC and the pain in the ass significant influence it is for cross-strait history and relations.
• Laowiseass on Chinese asking about your Mandarin language skills.
• Beach. Music. Smokin' hot babes. David Reid does a music festival at Fulong.
• Cycling Satin Sestina's excellent report with many pictures on the Alishan Race last weekend. 
• Lady Tung, Koxinga's wife.
• Pics from Lao Ren Cha of Shenkeng outside Taipei

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