Taiwan's latest economic data indicates the economy might have stabilized but the prospect of a recovery remains uncertain, analysts said Tuesday.
Leading indicators for July rose slightly for the second consecutive month, following a 16-month decline which ended in June, the Council for Economic Planning and Development said Monday.
The indicators, which gauge economic activity for the next three to six months, rose 0.1 percent month-on-month in July and 0.3 percent in June, the council said.
"The rises can been read as the economy has finally stabilized but they are far from significant enough to be taken as signs of a recovery," said Grand Cathay Securities Corp (大華證券) economist Vivian Wang.
"The economy is still consolidating at the bottom but there is a good chance the downturn would turn around in the last quarter of the year."
Other economists agreed the rises were too small to indicate a definite recovery.
"The rises [of 0.3 and 0.1 per-cent] appeared too small to justify unchecked optimism about the prospect of a sustainable economic recovery," said Chou Chi (周濟), research fellow at the Chung-Hua Institution for Economic Research (中華經濟研究院).
Chou said the economy started on its current downturn in the fourth quarter of 2000 and in turn would provide a lower comparative base for the fourth quarter.
The government had hoped for a recovery later this year on expectations of a possible economic turnaround in the US and a boost in domestic demand but it remained uncertain if such hopes would materialize, he said.
"Given a still sagging stock market and rising unemployment, it would be simply unthinkable to pin excessive hopes on a major upturn in private consumption anytime soon. The same concern may apply to the parliamentary and local elections in December. Campaign spending is likely to prove not as significant as many may expect given current economic conditions," Chou said.
Meanwhile, the month-on-month improvement in M1B money supply in July merely reflected a lower comparative base last year rather than a conspicuous expansion in stockmarket turnover, an economist with a local securities investment advisory company.
M1B in July was down 2.72 percent from a year earlier, compared with a 4.21 percent fall the previous month, due to falls in stock transactions compared with a year earlier, she said.
She said the lingering uncertainty overhanging the US economic outlook would continue to weigh on the Taiwan economy.
Taiwan's economic growth in the three months to June suffered its biggest quarterly fall for 26 years of 2.35 percent. The economy is expected to contract over the full year by 0.37 percent, sharply down from government's earlier estimate of 4.02 percent growth.
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