Taiwan Slowdown, Singapore Jobs Reflect EU Trade Impact: Economy
Taiwan’s economy expanded at the slowest pace since 2009, Singapore’s jobless rate unexpectedly rose and growth in South Korean industrial output eased in March, underscoring the continued impact of Europe’s crisis on Asian economies reliant on trade.
Taiwan’s gross domestic product rose 0.36 percent last quarter from a year earlier after climbing 1.89 percent in the previous period, a report showed today. Singapore’s unemployment rate climbed to 2.1 percent last quarter from near a three-year low of 2 percent, while South Korea’s production gained 0.3 percent from a year ago after rising 14.3 percent in February. All three reports missed estimates by economists in Bloomberg News surveys.
Asian central banks are juggling the need to damp inflationary pressures and bolster growth, with Europe’s debt crisis and a slowdown in China’s expansion weighing on the global economic outlook. Singapore’s manufacturing output shrank in the first quarter, the Bank of Korea lowered its full-year growth forecast this month and Japan reported last week that industrial production rose in March less than economists estimated.
“We have seen clear deterioration in various momentum indicators,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “This reflects weakness in demand from Europe and the U.S. and a slowdown in China. Europe will be weak even if it emerges out of a recession so the impact on Asia will still remain.”
Singapore manufacturers cut jobs after demand for the island’s goods faltered. Exports unexpectedly dropped last month as shipments of electronics eased and petrochemical sales fell amid a decline in demand from China. A stronger Singapore dollar, the best performer in Asia this year, may also weigh on export orders as the currency appreciation makes the island’s goods more expensive overseas.
The Singapore dollar rose 0.4 percent to S$1.2352 against its U.S. counterpart at 5:08 p.m. local time today, while the Taiwan dollar strengthened 0.3 percent to NT$29.232 at the 4 p.m. close, according to Taipei Forex Inc. The won rose 0.4 percent to 1,130.13 per dollar in Seoul, according to data compiled by Bloomberg.
South Korea’s production fell 3.1 percent from February when it gained a revised 0.6 percent. South Korea’s index of leading economic indicators rose 0.4 percent in March from February, compared with a 1 percent gain in February, today’s report showed. Sales of consumer goods dropped 2.7 percent from February and were unchanged from a year earlier.
“Today’s data raises a question about the strength of the recovery momentum, with exports falling and domestic demand staying weak,” said Park Sang Hyun, chief economist at HI Investment & Securities Co. in Seoul. “The second half will be much better but it largely hinges on China and other big economies.”
Some semiconductor chip producers and other technology companies cut inventories last month, probably ahead of the release of new products, which may bode well for production in coming months, Choi Sang Mok, director-general at the finance ministry, told reporters in Gwacheon today.
“The economy is on a recovery path but external uncertainties persist so it’s premature to see a full-speed recovery yet,” Choi said.
Taiwan’s growth slowdown may crimp scope for the central bank to raise interest rates even as higher fuel and electricity prices threaten to spur inflation. The government lowered its 2012 GDP growth estimate to 3.38 percent from 3.85 percent today, and increased the inflation forecast to 1.94 percent from 1.46 percent.
Thailand recorded a current-account deficit for the first time in four months in March amid rising oil prices and machinery replacements in factories after last year’s floods.
Spain’s economy officially entered its second recession since 2009 after shrinking in the first quarter. GDP fell 0.3 percent, the same as in the previous three months, the Madrid- based National Statistics Institute said today. European inflation slowed in April, with the rate falling to 2.6 percent.
The U.S. Commerce Department will provide details today of how consumption fared last month. Spending may have grown 0.4 percent in March, half as much as February’s 0.8 percent gain that was the biggest in seven months, according to the Bloomberg survey median. Incomes rose 0.3 percent, following a 0.2 percent increase, economists said.
Singapore’s economy added 27,400 jobs last quarter, compared with 37,600 in the previous period. The jobless rate of 2.1 percent in the first quarter compared with the median estimate of eight economists surveyed by Bloomberg News for a rate of 2 percent.
The government has tightened curbs on foreign labor after public dissatisfaction over the influx of workers from overseas led to record opposition gains in general elections last year. More than a third of Singapore’s 5.2 million population is made up of foreigners and permanent residents.
Prime Minister Lee Hsien Loong has said such limits will mean forgoing business opportunities and accepting slower growth. Finance Minister Tharman Shanmugaratnam said in February that the government would cut the proportion of foreign workers that companies can hire and may consider further increasing levies for employing them.
The services industry added 19,800 jobs last quarter, while manufacturing companies decreased payrolls by 500, the report showed, citing preliminary data. Construction employment rose 8,000 in the three months through March. Singapore’s industrial production in the first quarter dropped 1 percent.
“Some increase in the unemployment rate from historically low rates is still expected for the first quarter given lackluster industrial production in the period,” Alaistair Chan, a Sydney-based economist at Moody’s Analytics, said before the report. “A dimmer regional outlook likely also slowed hiring in tourist-related services.”
Singapore’s GDP will probably increase 1 percent to 3 percent this year, the central bank said in a macroeconomic review today, reiterating earlier forecasts. Employment may grow at a slower pace in 2012 even as local wages may climb at a “healthy” rate, it said.
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