Taiwan’s current business cycle, which peaked in January last year, is expected to bottom out in the second quarter, the National Development Council (NDC) said on Monday.
NDC Deputy Minister Kao Shien-quey (高仙桂) said that trends in the council’s composite index of leading indicators, the Chung-Hua Institution for Economic Research’s purchasing managers’ index and the Taiwan Institute of Economic Research’s composite index of manufacturing indicators showed signs that the domestic economy might hit bottom next quarter.
A traditional business cycle undergoes four stages: expansion, peak, contraction and trough, with expansion averaging 40 months and contraction lasting about 15 months in Taiwan, the council said, citing historical patterns.
Photo courtesy of the Executive Yuan
Taiwan is in its 15th business cycle, which included a 71-month expansion phase from March 2016 to January last year, when the economy benefited from a global supply chain shift to Taiwan, the return of Taiwanese businesses from overseas and robust demand for high-tech gadgets amid a booming stay-at-home economy, it said.
Its statistics showed that the expansion period was much longer than Taiwan’s historical average of 40 months.
It was the second-longest on record behind a 96-month period that began in September 1956.
However, after peaking in January last year, the cycle entered a period of decline, the council said.
With contractions in the business cycle averaging 15 months in the past, next month should be the trough, Kao said.
It remains to be seen whether the cycle would bottom out in the second quarter, as there are still many variables involved, such as the monetary policies of major central banks, the pace of economic recovery in China, geopolitical developments including the Russia-Ukraine war, and continued tension between the US and China, Kao said.
Additional reporting by Chen Cheng-hui
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