Taiwanese economy warming following brief boom

Taipei, Aug. 27 (CNA) Taiwan's index gauging the state of the economy flashed a "yellow-red" light in July indicating a warming economy, a downgrade from a "red light" in June, demonstrating booming conditions, the National Development Council (NDC) said Tuesday.

However, another index of leading indicators assessing the state of the economy over the next three to six months bucked the downtrend and moved higher from a month earlier in July, the NDC said.

NDC data showed the composite index of economic indicators fell three points from a month earlier to 35 to flash a yellow-red light, which ranges between 32 and 37, compared with a red light in June ranging from 38 to 45.

The local economy flashed the first red light in June in two and half 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 a booming economy.

The agency said the July signal resulted from an uneven economy with the tech sector benefiting from solid demand for information and communications devices, but the old economy industries experiencing a slower rebound.

The agency added Typhoon Kaemi also affected production and shipments in the local manufacturing sector in July.

As a result, out of the nine factors in the composite index, the sub-index on merchandise exports fell 2 points from a month earlier to flash a green light in July, compared with a red light in June, while the sub-index on industrial production also dropped one point to flash a yellow-red light, a retreat from a red light in June, the NDC said.

However, the other seven factors in the July composite index of economic indicators remained unchanged, the NDC said.

The seven factors are money supply, changes in stock prices, overtime hours in the industrial and service sector, imports of machinery and electric equipment, sales posted by the manufacturing sector, revenue generated by retailers, wholesale operators and food and beverage shops, as well as business sentiment among manufacturers.

Speaking with reporters, Chiu Chiu-ying (邱秋瑩), deputy director of the NDC's Department of Economic Development, said despite the fall in the composite index in July, the leading indicators and coincident indicators, which assess the current economic conditions, still moved higher, showing the local economy continued growing.

In July, the leading indicators rose 1.13 percent from a month earlier to 105.11, with all seven factors moving higher, such as export orders, money supply and changes in stock prices, NDC data showed.

The coincident indicators rose 1.04 percent from a month earlier to 105.40 in July with its seven sub-indexes all trending higher, including industrial production, power consumption and sales posted by the manufacturing sector, the data showed.

Chiu said the local tech sector is expected to benefit from peak season effects in the second half of this year and the old economy sector is expected to see a rebound in shipments after inventory adjustments.

Chiu said she could not rule out the possibility that the local economy would flash a red light again in the second half of the year, adding Taiwan commands strong competitiveness in artificial intelligence development and semiconductor manufacturing.

The NDC cited a forecast by the Directorate General of Budget, Accounting and Statistics saying the gross domestic product will hit 3.90 percent in 2024, a rebound from 1.28 percent in 2023.

Still, the NDC cautioned the global economy will face uncertainties such as elections in major economies, including the presidential vote in the United States, changes in monetary policies by major central banks, growing trade protectionism and escalating geopolitical tensions.