Index cause for optimism: CEPD

CAUTIONING VOICE::Commenting on the report, a former chairman of the CEPD said that many economic indicators have not yet returned to pre-2007 levels

By Camaron Kao  /  Staff reporter

Wed, Nov 28, 2012 - Page 13

The nation’s leading indicator index rose by 0.2 percent from September to 131.4 points last month, indicating a better economic outlook for the near future, the Council for Economic Planning and Development (CEPD) said yesterday.

The index’s annualized six-month rate of change, which provides a more accurate forecast of the business cycle in the near term, however, decreased by 0.37 percent to 3 percent last month, the council said.

The coincident index was up 0.6 percent to 133.3 points, its third consecutive increase.

Citing the simultaneous increase of the coincident index and shrinking of the annualized six-month rate of change, Hung Jui-bin (洪瑞彬), director-general of the council’s economic research department, told a press conference that the domestic economy was picking up.

Hung cautioned that economic momentum was still weak since the annualized six-month rate of change was still decreasing.

The European debt crisis and the US fiscal cliff remained risk factors, he said.

The dire stock market conditions and the stagnation of salaries has caused low private consumption, he added.

The overall monitoring indicators last month flashed “yellow-blue” for the second month, with the total score of the indicators dropping two points to 18, the report’s data showed.

The production, consumption, financial situation and labor market are heading in a positive direction, while exports remained weak, Hung said.

The indicator of custom-cleared exports lost three points last month, changing its individual signal from “yellow-red” to “blue,” while the indicator for the sales index of wholesale, retail and food services gained one point and changed its individual signal from “blue” to “yellow-blue.”

Lin Lih-jen (林麗貞), the council’s researcher, said that export values in September and last month were similar. The higher year-on-year growth rate in September was because of a low base effect last year when an accident at a Formosa Plastics Group (台塑集團) factory drove down petrochemical exports for that month.

The council revised both its signals for manufacturing sales and sales index of wholesale, retail, and food services in September from “yellow-blue” to “blue,” reducing the total score of monitoring indicators in September from 22 points to 20 points.

Commenting on the report, Chen Pao-chih (陳博志), former chairman of the CEPD, said that many economic indicators have not yet returned to levels seen before the global financial crisis in 2007.

Although there are many signs that the economic situation will not deteriorate further, it does not follow that economic conditions are improving, Chen said.

If the economic momentum remains low for a year, the base level will be lowered, making growth in the following year easier to see, Chen said.

To gauge whether the economy is recovering, people should look at the actual numbers, instead of growth rates, he said.