Tue, Jul 28, 2009 - Page 12 News List

CEPD indicators show pickup

‘YELLOW-BLUE’: Five of the seven leading economic indicators, including export orders, showed improvement, but analysts warned that the downturn is not over yet

By Crystal Hsu  /  STAFF REPORTER

The domestic economy’s cyclical indicators flashed a “yellow-blue” light last month after nine consecutive blue signals, showing that the state of the economy is improving thanks to a pickup in retail and wholesale, the Council for Economic Planning and Development said yesterday.

The index of leading indicators used to gauge the economic outlook for the next three to six months climbed 1.8 percent to 97.9 points last month, with the annualized six-month rate gaining 4.8 points to 8.3 percent, the CEPD said.

“The economic indicators turned from blue to yellow-blue in June, owing to improving consumption, industrial production and equity market data,” Hung Jui-bin (洪瑞彬), director-general of the economic research department, told a media briefing.

The change indicates the economy is moving toward stability, but it is premature to talk about a recovery, Hung said.

“The job market [at home] remains tough and the world economy may not regain significant momentum until the second half of next year,” the official said.

Of the seven leading indicators, five picked up last month: export orders, money supply, semiconductor book-to-ratio data, share prices and average overtime in industry and services.

The M1B money supply, which refers to cash in circulation and passbook deposits, jumped 16.9 percent last month as investors continued to channel funds from time deposits to demand savings accounts.

However, new building permits and manufacturers’ inventories slipped from a month earlier.

The index of concurrent indicators gained for the fifth month to 89.6 points, up 1.1 percent from a month earlier.

CEPD research division chief Wu Ming-huei (吳明蕙) said the sales index of wholesale, retail and food services contributed the most to the rise, with business volume increasing 5.8 percent from last year.

Analysts said the economy was improving, but added that the downturn was not over yet.

Cheng Cheng-mount (鄭貞茂), chief economist at Citigroup Inc Taiwan, said the CEPD report confirmed that the outlook was improving.

“The economy will continue to contract in the third quarter and recover to modest growth in the fourth quarter because of the base effect,” Cheng said by telephone.

Cheng put the contraction at 8.5 percent between April and last month. The Directorate-General of Budgeting, Accounting and Statistics is scheduled to release the figure next month.

Kevin Hsiao (蕭正義), head of UBS Wealth Management Research, said there was a gap in the nation’s financial and economic data, with the former outperforming the latter.

Hsiao said excess capital and improving investors’ confidence accounted for the difference adding that a true recovery would hinge on the global economy.

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