Taiwan's economy shows signs of cooling slightly in September

Taipei, Oct. 28 (CNA) Taiwan's index gauging the state of the economy flashed a "yellow-red" light in September, signaling a moderately hot economy, down from a "red light" indicating overheating in August, the National Development Council (NDC) said Monday.

The composite index of economic indicators dropped five points from a month earlier to 34, the lowest in six months, to flash a yellow-red light, which ranges between 32 and 37, compared with a red light in August, according to NDC data.

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 moderately hot economy, and red pointing to an overheated economy.

The NDC said the weak export momentum of companies in the old-economy sector coupled with a high base of comparison a month earlier led the fall in the composite index in September.

Among the nine factors in September's composite index, the sub-indexes for merchandise exports, as well as for revenue generated by retailers, wholesalers, and food and beverage shops each fell 2 points from a month earlier to flash green lights, compared with red lights in August.

The sub-index for business sentiment among manufacturers dropped one point from a month earlier to flash a yellow-blue light.

The other six factors in the September composite index of economic indicators remained unchanged, the NDC said.

They 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, as well as industrial production.

NDC Department of Economic Development Director Chiu Chiu-ying (邱秋瑩) said the merchandise exports index's fall to a green light from a red light a month earlier was mainly due to weak international demand and falling oil prices.

That has destabilized export momentum in the old-economy sector, Chiu said.

Also, because the Mid-Autumn Festival fell earlier than normal this year on Sept. 17, companies built up inventories of goods for the festival earlier than last year, translating to less economic activity in September.

Although the sub-index for imports of machinery and electric equipment, which reflects the investment momentum of manufacturers, still flashed a red light, the growth rate was moderate, leading to questions over whether investment momentum has weakened.

Chiu did not think so. She said companies like contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) are expected to increase investment next year given the recent capital spending strategies of major international manufacturers.

In September, the index of leading indicators, which gauges the economic climate over the next six months, rose 0.07 percent from a month earlier to 103.35, while the coincident indicators index, reflecting the current state of the economy, rose 0.77 percent from a month earlier to 105.90 in September, NDC data showed.

Chiu said that with these indicators continuing to rise, and domestic and foreign institutions revising upwards their economic growth forecasts for Taiwan this year, there is no doubt that Taiwan's economic growth trend will continue.

Looking to the future, Chiu said, as AI applications continue to expand, the demand for domestic electronics and ICT products will be strong, while the demand to build up inventories for the peak shopping season in Europe and the United States will boost export momentum.

Close attention should be paid to uncertain factors that could affect the domestic economy, she said, however, pointing to the U.S. presidential election, global trade barriers, and geopolitical relations in the Middle East.