Taiwan’s leading indicator index dropped to the lowest in nine months last month, evidence that economic expansion is slowing, the Council for Economic Planning and Development (CEPD) said yesterday.
The leading indicator index, which is used to gauge the economic outlook for the upcoming six-month period, dropped a fifth straight month to shed 0.4 percent from a month earlier to record 117.2 points, compared with a 0.3 percent contraction in September, the council’s statistics showed.
“As the leading indicators -continued to fall, the nation’s economic growth momentum has become weaker,” Hung Jui-bin (洪瑞彬), director-general of the council’s economic research department, told a media briefing.
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 an 11th consecutive month to 0.3 percent last month, down 1.8 percentage points from September.
“If the rate dropped to below zero, that means the economy is starting to contract,” Wu Ming-hui (吳明蕙), an analyst at the CEPD, said on the sidelines of the press conference.
However, she said that it depends on the following trend as it might rebound to positive territory afterward.
The latest leading indicator index of the Organisation for Economic Co-operation and Development dropped for the fourth straight month and that of Asian countries fell for the seventh straight month, the CEPD data showed.
All the components making up the leading index, except for the stock price index, recorded negative cyclical movements last month from September. Other components include export orders, manufacturing inventory and the SEMI book-to-bill ratio.
“The downward trend of the leading indicators is within our -expectations as it was due to a base effect. The current economy is still growing, only at a steady and moderate pace,” Hung said, adding that the government recently revised upward its GDP growth for Taiwan to 9.98 percent for the full year.
The coincident index rose 0.5 percent from September to 124 points with its trend-adjusted index dropping 0.2 percent to 106.1. The sub-indexes of non-farm employment, sales index of wholesales, and retail and food services had positive cyclical movements from the previous month, according to the CEPD.
Looking ahead, Hung played down uncertainty over global economic growth, saying that Ireland is being given an EU-IMF bailout package, which will alleviate Dublin’s financial predicament.
“The situation does not seem as bearish as we thought. Demand in emerging countries remains robust, although China is starting to show signs of slower expansion,” Hung said, noting that the latest economic data in the US are improving.
With the signing of the Economic Cooperation Framework Agreement (ECFA) with China and the government’s continuous efforts to attract global investment to Taiwan, the CEPD said it remained optimistic yet cautious about the nation’s economic prospects.
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