Taiwan's exports dropped 7% in September

Blame it on holiday effects.

According to UBS Investment Research, Taiwan exports contracted a sharper-than-expected 7%y/y in September (market:-1.2%;UBS: -1.5%).

Here's more:

The year-on-year contraction nevertheless reflected to a large extent the holiday effects (fewer working days this September) and the high base of comparison last year (given strong shipments last September on iphone 5 launch).

We continue to expect a moderate recovery in Taiwan’s exports (high single-digit y/y growth in 2014), reflecting the anticipated improvement in European and US demand.

The US and Europe combined still drive over 36% of Taiwan’s value added exports. Clearly, the major near-term overhang remains the unresolved fiscal debates in the US.

Fewer working days
The holiday effects were pronounced this September. There were 2-3 fewer working days in Taiwan, China and Korea this year, as the mid-Autumn festival (which is based on the lunar calendar) fell in mid-September this year but the last day of September last year—incidentally also a Sunday.

As a crude way to adjust for this holiday effects, we calculated exports per working day (22 days this year as opposed to 24 days last year).

This measure expanded 1-2%y/y in September 2013, providing an indication that export weakness was exaggerated by the headline.

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