Tue, Jun 29, 2010 - Page 12 News List

Economic indicators flash ‘yellow-red’

SLOWDOWNAfter flashing ‘red’ for 11 months, the new signal indicates that growth has slowed, although analysts say closer ties with China could encourage development

By Ted Yang  /  STAFF REPORTER

The economic monitoring indicators flashed “yellow-red” last month, snapping a four-month streak of signaling “red” because of subdued growth in money supply and a slump in the stock market, the Council for Economic Planning and Development (CEPD) said yesterday.

The headline economic index dropped two points to 37, with the sub-index of monetary aggregates M1B turning “yellow-red” after it had flashed “red” for 11 consecutive months. The sub-­index of stock prices also turned “­yellow-red” from the “red” registered in April.

“This means that the pace of economic expansion has slowed,” Hung Jui-bin (洪瑞彬), director-general of the council’s economic research department told a media briefing.

He added that the economy is still posting healthy growth.

The composite leading index stood at 110.5 points last month, up 0.3 percent from April, but its annualized six-month rate of change dropped 2.4 percentage points to 10.8 percent, posting a decline for the fourth straight month, the report showed.

Among the leading index’s seven components, the stock price sub-index, the semiconductor book-to-bill ratio, real monetary aggregates M1B and the export orders sub-index posted a contraction from the previous month, the CEPD said.

The coincident index rose to 112.8 points, up 0.9 percent from the previous month with its trend-adjusted index rising 0.9 percent to 110.7, representing six consecutive months of growth, the report showed.

Looking ahead, Hung remained cautious yet upbeat about the economy as he said that improved cross-strait ties would bolster private investment and domestic consumption, which could in turn increase local employment.

In related news, the CEPD said yesterday that the Economist Intelligence Unit (EIU) revised upward its GDP growth forecast for Taiwan for the full year to 8.5 percent earlier this month, up from its previous estimate of 5.6 percent.

That marked the highest prediction among all economic research institutes at home and abroad, followed by Goldman Sachs at 7.2 percent and Citibank at 7 percent, CEPD data showed.

“Relations between Taiwan and China will continue to improve amid cautious support from the majority of Taiwan’s citizens for closer ties with the mainland,” the EIU said on its Web site, adding that the economy could expand 4.6 percent next year.

“An ECFA [economic cooperation framework agreement] with China is the key, which will increase the nation’s fixed capital investment and improve the job market,” CEPD vice chairman Hu Chung-ying (胡仲英) told reporters.

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