CEPD index indicates lackluster performance

SHOCKS::Although the IMF has forecast improvement in the global economy, uncertainties remain as the US ended its quantitative easing and the yen remains weak

By Camaron Kao  /  Staff reporter

Fri, Jun 28, 2013 - Page 13

The index of economic monitoring indicators last month flashed “yellow-blue” for a record ninth consecutive time, indicating a lackluster performance of local economy, the Council for Economic Planning and Development (CEPD) said yesterday.

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

Following this, the council uses “yellow-blue” to indicate a transition between recession and growth, and “yellow-red” for a transition between growth and overheating.

The latest report showed the score of composite monitoring indicators — which takes into account both leading and coincident indicators — was 19 last month, up 2 points from April, because of the mixed result of higher exports, rising stock market, higher monetary aggregate M1B and lower trade and food service sales last month compared with the same period a year ago.

“The declining trade and food services sales index was due to the rising food safety concerns after industrial starch was found in certain food products,” Hung Jui-bin (洪瑞彬), director-general of the council’s economic research department, told a press conference.

However, Hung said consumers’ concerns over food safety will ease since businesses and the government took immediate action to rectify the problem.

The index of leading economic indicators, which is used to gauge the nation’s short-term economic outlook, posted its tenth consecutive increase to 104.5 points last month, up 0.7 percent from a month earlier, the report said.

The index’s annualized six-month rate of change, which provides a more accurate forecast of the business cycle in the near term, climbed 0.5 percentage points to 7.6 percent last month from a month earlier, the report said.

The index of coincident indicators, which reflects monthly economic conditions, rose 0.002 percent to 98.8 points last month, marking the first increase after ninth consecutive declines, according to the report.

“According to the forecasts of Global Insight and the IMF, the global economy would improve from quarter to quarter this year, which would benefit local economy,” Hung said.

However, uncertainties still remain as the US plans to start unwinding its quantitative easing (QE) policy later this year, the value of Japanese yen is still weak and economic growth in Germany and France looks to lose steam, he said.

“The economy is extremely sensitive to shocks and uncertainties because growth momentum is weak,” Hung said.

Hung said he expected the impact of Fed's announcement of ending its QE policy to start to show in this month’s report.

“The economy will not improve significantly if more fundamental aspects, such as investment and salaries, do not increase,” former council chairman Chen Pao-chih (陳博志) said by telephone yesterday.

“The condition of the stock market and the monetary aggregate [which rose last month] may provide an indication of the economy, but we cannot say autumn is coming when we see one falling leaf,” he said.