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Economy stays in contraction in December, flashes 2nd straight 'blue' light

02/03/2023 08:17 PM
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CNA photo Feb. 3, 2023
CNA photo Feb. 3, 2023

Taipei, Feb. 3 (CNA) Amid weakening global demand, Taiwan's exports-oriented economy remained in contraction mode in December as it flashed a "blue light" for the second consecutive month, the National Development Council (NDC) said Friday.

In addition, the local leading indicators which gauge the economic climate over the next six months also moved lower in December, but the decline showed signs of moderating, said the NDC, the top economic planning body in the country.

The composite index of monitoring indicators, which reflects the current economic situation, stayed unchanged from a month earlier at 12 in December, but the score continued to place the local economy in the blue-light range of 9-16 points, indicating contraction, according to the NDC.

In November, Taiwan's economy flashed its first blue light in four years.

The NDC uses a five-color system to gauge the country's economic performance, with blue indicating economic contraction, yellow-blue representing sluggishness, green signifying stable growth, yellow-red referring to a warming economy, and red pointing to an overheated or booming economy.

Speaking with reporters, Wu Ming-hui (吳明蕙), head of the NDC's Department of Economic Development, said the global economy had felt the impact from fast-growing inflation and constant rate hikes by the major central banks in the world, sending demand into a tailspin, hurting Taiwan's outbound sales and production, and dampening confidence in the local economy amid continued inventory adjustments.

However, a silver lining was that domestic demand remained resilient, Wu said.

Among the nine factors of the December composite index of monitoring indicators, the sub-index on sales posted by the local wholesale, retail and food/beverage industries increased by one point from a month earlier in December, flashing a yellow-blue light, improving from a blue light in November, the NDC said.

Wu said amid eased COVID-19 controls, business activities in Taiwan improved with more enterprises willing to hold year-end banquets and countdown parties, boosting retail sales and food/beverage revenue.

On the other hand, the NDC said, the sub-index on imports of machinery and mechanical equipment fell by one point from a month earlier, flashing a yellow-blue light in December, a downgrade from a green light in November.

Wu said the decline reflected many electronics component suppliers turned cautious about expansion in the wake of falling global demand.

The other seven factors -- money supply, share price changes, industrial production, employment, merchandize exports, sales posted by the manufacturing sector, and business sentiment among manufacturers -- remained unchanged in December, according to the NDC.

The NDC said the leading indicators fell by 0.44 percent from a month earlier to 96.21 in December, after a 0.48-percent fall in November, marking the 13th consecutive month of a decline.

While the leading indicators fell by 8.1 percent in the 13-month period, Wu said the moderating decline showed positive signs for the local economy over the next six months.

Among the seven factors in the December leading indicators, the sub-indexes on semiconductor equipment imports, employment and business sentiment among manufacturers moved higher from a month earlier, the NDC said.

The sub-indexes on other four factors -- export orders, money supply, share prices, and the floor areas of new home construction projects -- moved lower from a month earlier in December, the NDC added.

Still, Wu said as the leading indicators continued to move lower, it would take some time for the indicators to end the downtrend, adding that Taiwan's exports are expected to see headwinds in the first half of this year, and a gradual improvement is possible in the second half of the year.

Wu said it remained too early to say exactly when the local economy will bottom out.

(By Su Ssu-yun and Frances Huang)

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