While the nation’s business climate monitors mostly continued to inch upward last month, the escalating trade war between the US and China remained the biggest variable affecting growth in the second half of this year, the National Development Council (NDC) said yesterday.
The overall business climate monitor was “green” last month with a total score of 27, signifying stable economic growth, up from 22 in June, when it was “yellow-blue,” or shifting gears as it climbed out of sluggish growth, the council said.
Economic growth momentum is expected to be propped up by low unemployment, which has averaged 3.68 percent in the first seven months of this year, its lowest in 18 years, it said.
Spending would be supported by employers’ willingness to raise wages and an estimated NT$1.5 trillion (US$48.75 billion) in cash dividend payouts to shareholders, the council said.
Despite looming concerns about global trade, local businesses are expected to accelerate capital spending in the second half, the council said.
Indicators for imports of machinery and electrical equipment, as well as the Taiwan Institute of Economic Research’s (台灣經濟研究院) manufacturing sector composite indicator, were all “yellow-red” last month, up from “green” a month earlier, the council added.
Led by the semiconductor industry, capital expenditure last month rose 17.6 percent from the previous month, continuing the uptrend that began when the reading turned positive in May, the council said.
The government is expected to release up to NT$200 billion for projects contracted to the private sector in the second half, while public spending plans would enter their execution phase, it added.
The council’s trend-adjusted leading index rose at a slower pace from the previous month, while the coincident index accelerated its decline, council research director Wu Ming-huei (吳明蕙) told reporters.
“While that would imply that the economy is recovering at a tepid rate, the downtrend in the leading and coinciding indicators do not necessarily show that the economic cycle has shifted from expansion to contraction,” Wu said.
Ongoing geopolitical tensions and volatility in the financial markets could dampen the momentum of the coming peak season for technology exports, Wu said.
“We maintain a cautiously optimistic view on the economy and will be monitoring developments,” he added.
The council last month began implementing a revised monitoring system to reflect changes in the local economic structure and take into account the weakening of some component indicators, it said.
The scoring threshold was lowered so that incremental changes could be reflected in the council’s five-color system to better reflect the nation’s economic situation, the council said.
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