Taiwan’s service activity showed signs of stabilizing on the back of an increase in hiring and wages in the local service sector, according to a report released by think tank Commerce Development Research Institute (CDRI, 商發院).
In the report, the CDRI said the index of service industry (ISI) for August rose to 100, up from a revised 99 in July, flashing a “green light” to show stable growth in local service activity.
The CDRI uses a five-colored signal system in conjunction with the ISI, which focuses on three major segments — securities trading, the labor market and wages, and business operations — to describe the climate of the local service sector.
Red signals overheating, yellow-red shows slight overheating, green represents steady growth, yellow-blue signals sluggishness and blue indicates recession, the institute said.
The CDRI said that because the Ghost Festival, the 15th day of the seventh month in the lunar calendar, fell in August this year, demand for food and other goods for worshiping was on the rise, prompting wholesale and retail operators to hire more employees.
The institute said summer vacation also led to higher consumption and a boost in demand in the local service sector.
Under such circumstances, the average overtime pay and average current wages for August rose from a month earlier to push the sub-index in the labor market and wage segment to 102, up from 100 in July, the CDRI said.
However, in the business operations segment, which involves several aspects such as sales growth, cargo deliveries and electricity consumption, the sub-index fell to 98 in August from 99 in July as demand for home appliances, precious metal and communications devices fell, the CDRI said.
The subindex in the securities market stayed unchanged at 100 in August from July, the CDRI said, adding that the local bourse was affected by concerns over a possible exit by the US Federal Reserve from its monthly US$85 billion bond-buying program, but a stable New Taiwan dollar lent some support to the local financial market.
Looking forward, the CDRI said as the Fed left its stimulus measures unchanged in the last policymaking meeting held on Sept. 17 and Sept. 18, the local securities market is expected to see the impact from such a negative factor fading for now.
The institute said the fundamentals in Japan and Europe are improving and China, the world’s second-largest economy, is expected to have a soft landing from its past rapid growth. As a result, Taiwan’s securities market, which is highly correlated with global economic conditions, is expected to stay stable.
However, the CDRI said that with the summer vacation coming to an end and a slow season in the tourism industry beginning last month, local service activity is expected to experience stagnation in the month.