Taiwan’s leading indicator index dropped for the third straight month last month, signaling that the nation’s economic growth is slowing down, the Council for Economic Planning and Development said yesterday.
The leading indicator index, which is used to gauge the economic outlook for the upcoming six-month period, fell 0.3 percent from a month earlier to 117.7 points last month, the council’s statistics showed.
The index’s annualized six-month rate of change, which provides a more accurate forecast of business cycles, also indicated a downturn. The growth rate declined for the ninth consecutive month to 4.1 percent last month, down 2.6 percentage points from July.
“We should remain cautious,” Hung Jui-bin (洪瑞彬), director-general of the council’s economic research department, told a media briefing, adding that private investment and exports would become the two main drivers of the nation’s growth for the rest of the year.
All of the seven components making up the leading index recorded negative cyclical movements last month from June, namely export orders, manufacturing inventory, building permits, real monetary aggregates, M1B and stock prices, the council’s report showed.
“The OECD [Organisation for Economic Co-operation and Development] leading indicator has also decreased for two months in a row, indicating an easing of global economic growth,” council Vice Chairman Hu Chung-ying (胡仲英) told reporters.
“Although the global economy has shown signs of a slowdown, the nation’s economy may continue to benefit from improving cross-strait relations,” Hu said, despite a 3.7 percent drop in China’s leading economic index from last October.
Hu also said that a trade war between China and the US and the on-going sovereignty dispute between Beijing and Tokyo might impact on Taiwan’s economic outlook.
The government should seek to sign free-trade agreements with other countries besides a trade pact with China to protect Taiwan’s interests in case the two sides of the Taiwan Strait have trade problems in the future, he said.
The coincident index rose 0.8 percent from July to 124.2 points, while its trend-adjusted index increased 0.2 percent to 108.5. The growth pace for both indexes showed signs of slowing, the council’s data showed.
Asked whether slower economic expansion would reduce the likeliness of the central bank raising interest rates, Hu declined to make any predictions, but said the monetary regulator cares a lot about the nation’s exports and that the unemployment rate is still high.
The central bank is scheduled to hold its quarterly board meeting on Thursday, when it will decide whether to raise its policy rate.
Looking ahead, Hu said that despite the eurozone debt crisis and high unemployment in the US, Taiwan’s economy was expected to grow because the government was aggressively trying to attract international investment.
Taiwan would also be helped by China’s surging internal demand, he said.
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