Taiwan’s falling imports suggest weak domestic demand

Taiwan's imports fell surprisingly by 3.5% year on year in May after rising by 0.5%YoY a month ago, while exports contracted 2%YoY after the contraction of 1.3%YoY in April.

In our view, exports were expected to be poor due to the initial stages of recovery in some economies, but the fall in imports is concerning.

Even though Taiwan has done a good job of dealing with the pandemic, the economy can't escape from weak demand.

The speed of the contractions doesn't suggest that imports are in incredibly poor shape but the imported amount - just US$ 22.28 billion in May 2020, was the worst month for imports, with the exception of Chinese new year months and September 2017 when imports were US$ 22.21 billion.

Though low oil price can drag import amounts lower, imports of goods that serve domestic consumption, which contributed to more than 12% of total imports, fell by 5.6%YoY.

This contraction strikes us as quite strange as the consumption coupon and other consumption stimuli will start on 1 July. Importers of consumer goods should prepare for a spending spree unless they are pessimistic about the effectiveness of the stimulus.