Staff reporterThe nation’s business cyclical indicators flashed blue last month, the first time since May 2003, signaling an economic slowdown attributable to a bearish stock performance and shrinking exports to major trade partners, the Council for Economic Planning and Development (CEPD) said yesterday.
The economic downturn was expected to last for the entire third quarter, officials and analysts in the private sector said, disagreeing in their assessment of when the economy would recover.
The government’s indicators stood at 15 points last month, down from 20 points in June, and flashed blue — meaning the economy had weakened, a council report showed. A perfect sore is 45.
“The drop of five points changed the light signal from yellow-blue to blue,” Wu Ming-huei (吳明蕙), an analyst at the council, told a press conference.
“Industrial production alone dropped two points. Had this not occurred, the indicator would have remained yellow-blue,” Wu said.
Only the indicator for the semiconductor book-to-bill ratio posted a slight increase, at 0.83 percent from the previous month, while the indices of export orders, real monetary aggregates, stock prices, building permits and others all had worsened, the report said.
The coincident index stood at 109.6 points last month, down 0.7 percent from June, the report said. Its trend-adjusted series decreased 1.2 percent for the fifth straight month to 96.7 points, with all indicators reporting a negative movement, the report said.
Hung Jui-bin (洪瑞彬), director-general of the council’s economic research department, said sluggish domestic demand was also to blame.
“The slowdown is likely to linger in the next two months as the money for the [government’s] stimulus package has yet to be distributed and its impact will be felt in the fourth quarter,” Hung said.
Hung said the Cabinet would parcel out the special NT$130 billion (US$4.12 billion) budget next month for public works projects in different parts of the country. Through this measure, the government hopes to boost GDP growth by 0.45 percentage points this year.
Falling fuel and raw material prices were positive signs of an economic recovery in the fourth quarter and next year, Hung said.
Kevin Hsiao (蕭正義), an analyst at UBS AG’s Taipei branch, said the clouds were unlikely to clear before the end of this year in light of falling demand for technology products from China and other Asian markets.
Hsiao said that exports, the mainstay of the nation’s GDP growth in the first half, had weakened markedly in the second half, with shipments to China posting single-digit expansion in last month and expected to remain sluggish in the next two months or longer.
Despite the negative data, a visiting Deutsche Bank economist said yesterday that Taiwan would benefit from its economic integration with China.
“[Taiwan] can offer a lot to [China] and there’s a number of benefits,” Nobert Walter, chief economist of Deutsche Bank Research, told a European Chamber of Commerce in Taipei luncheon.
Additional reporting by Joyce Huang
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