Fri, Dec 28, 2012 - Page 13 News List

CEPD says economy bottoming out

‘SKEPTICAL’:A former CEPD chairman questioned the council’s interpretation of last month’s figures, saying they were not indicative of an impending economic recovery

By Camaron Kao  /  Staff reporter

The economy has started bottoming out, but the momentum remains weak, a Council for Economic Planning and Development (CEPD) official said yesterday.

The index of leading economic indicators, which is used to gauge near-term economic outlook, edged up 0.8 percent last month from a month earlier to 133.7 points, the council’s monthly report showed

The index’s annualized six-month rate of change, which provides a more accurate forecast of the business cycle in the near term, climbed 0.6 percentage points to 5.8 percent last month from a month ago, marking four months of consecutive improvement, the report said.

Meanwhile, the index of coincident indicators, which reflects monthly economic conditions, rose 0.01 percent to 98.19 points last month, its third consecutive increase.

The composite monitoring economic indicators — which take into account both leading and coincident indicators — flashed “yellow-blue” for the third month last month, with a score of 20, up 1 point from October, the report showed.

The council uses a five-step spectrum to gauge domestic economic health, with “blue” signaling recession; “yellow-blue” a slowdown; “green” steady growth; “yellow-red” a slight overheating; and “red” overheating.

“We can see that the economy is recovering based on the increase in the leading indicators, coincident indicators and monitoring indicators, but the process will be slow,” Hung Jui-bin (洪瑞彬), director-general of the council’s economic research department, told a press conference.

“The leading indicators and coincident indicators only changed slightly last month, small changes compared with the 10 percent monthly rise seen in 2009,” Hung said.

Citing the large variance in the UN’s forecast of global economic growth of 0.2 percent to 3.8 percent next year, Hung said the element of uncertainty remains high.

The UN report released on Dec. 18 suggests that if problems such as the US “fiscal cliff,” European debt crisis and slow growth in China were to worsen, the global economy might grow only 0.2 percent, which would affect Taiwan’s exports, Hung said.

Sluggish stock investment sentiment and stagnant salaries also pose challenges to the economy, as they could drag down private consumption, he said.

Commenting on the latest data, Chen Pao-chih (陳博志), a former council chairman, said the economy has yet to bottom out, adding that he does not see signs of a recovery based on the council’s latest report.

“The rise in the [economic] indicators is merely a reflection of the low base last year and only means that the economy will not decline further,” Chen said by telephone. “Only when the indicators rise significantly will economic conditions improve.”

He added that the probability of the economy worsening was low.

The European debt crisis is not a new problem and chances are low that it would worsen, and the US is likely to deal with its fiscal cliff problem with a tighter budget in the future, he said.

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