Taiwan economy expands more than estimated

German retail sales unexpectedly declined in June, suggesting that doubts about Europe’s economic recovery weighed on consumer spending.

Sales adjusted for inflation and seasonal swings dropped 1.5% from May, when they rose 0.7%, the Federal Statistics Office in Wiesbaden said yesterday.

Economists predicted an increase of 0.2%, according to the median of 25 estimates in a Bloomberg News survey. Sales fell 2.8% from a year earlier.

Factory orders, industrial production and exports all declined in May. At the same time, the Ifo index of German business confidence rose for a third month in July and GfK SE said consumer confidence will climb to the highest level in almost six years in August.

The Bundesbank said last week that economic growth would slow this quarter after a strong expansion in the three months through June.

“The second quarter is dominated by catch-up effects after a weak start into the year,” said Christian Lips, an economist at NordLB in Hanover.

“Growth will slow down a bit for the rest of the year but the economy will definitely expand and Germany will remain the growth engine for Europe.” — Bloomberg

Taiwan’s economy expanded at a faster-than-estimated pace in the second quarter as domestic consumption improved, even as a slowdown in China damps the outlook for the island’s exports.

Gross domestic product rose 2.27% from a year earlier after increasing 1.67% in the first quarter, the statistics bureau said in a preliminary report yesterday. The median estimate of 23 economists in a Bloomberg News survey was 2.1%.

The pick-up in growth came as the island faces increasing risks from China, its biggest trading partner, which recorded a second straight quarterly slowdown.

China Premier Li Keqiang’s efforts to rein in a record credit boom and curb housing prices increase the risk of missing the year’s expansion goal, dragging on the global recovery and hurting demand for Taiwan’s products.

In the second half, Taiwan’s “recovery will still be at a very slow pace because of the weakness in external demand,” said Ma Tieying, an economist at DBS Group Holdings Ltd. “The slowdown of China is a major risk facing Taiwan because the economy is largely supported by China.”

The benchmark Taiex stock index slipped 0.3% at 9.51am local time. The Taiwan dollar gained 0.2% to NT$29.962 against the US dollar, according to Taipei Forex Inc. It has declined about 3% this year.

Taiwan in May lowered its official forecast for growth this year to 2.4% from 3.59%. The economy expanded a seasonally-adjusted 0.59% in the second quarter from the previous quarter, yesterday’s report showed.

Private consumption increased 1.61% in the second quarter from a year earlier, versus a 0.35% gain in the previous period. Manufacturing rose 1.22% from a year earlier, slower than a 1.54% pace in the first quarter.

President Ma Ying-jeou said in an interview last week that he ruled out driving down the Taiwan dollar to boost exports following the currency’s rally against the yen.

He said the government aimed for growth of at least 2% this year. — Bloomberg