Taiwan's economy close to overheating: Economic indicator index

Taipei, Dec. 29 (CNA) An index gauging the state of Taiwan's economy turned warmer in November, reflecting an ongoing boom in demand for AI applications that could cause the economy to overheat in the near future, the National Development Council (NDC) said Monday.

Another index of leading indicators, which gauges the potential state of the economy over the next six months, also moved higher in November, the NDC said.

The composite index of economic indicators rose 2 points in November from a month earlier to 37, flashing a warming "yellow-red" light that was on the verge of tipping over into a "red light," indicating overheating, according to NDC data.

The NDC uses a five-color system to track the economy, with red signaling overheating (38-45 points), yellow-red indicating a warming economy (32-37 points), green meaning stable growth (23-31 points), yellow-blue reflecting sluggishness (17-22 points), and blue signaling contraction (9-16 points).

Chen Mei-chu (陳美菊), head of the NDC's Department of Economic Development, said Taiwan continued to benefit from solid demand for AI and high-performance computing devices, and peak season effects in the fourth quarter further boosted exports.

Among the nine factors comprising the composite index, the sub-index for sales generated by the wholesale/retail and food/beverage sectors went from a yellow-red to red light, while the sub-index for business sentiment among manufacturers went from a blue light to yellow-blue light.

Chen said AI enthusiasm strengthened the wholesale sector and retailers were boosted by promotional campaigns, while non-tech sectors felt relieved as global price competition faded to some extent, boosting the sentiment of manufacturers overall.

The other seven factors -- money supply, stock prices, industrial production, overtime hours, merchandise exports, manufacturing sector revenue, and machinery and electric equipment imports -- stayed unchanged during the month.

The leading indicators increased for a fourth consecutive month, gaining 0.48 percent from a month earlier to 101.70 in November, an indication that stable growth could be seen in the coming months, Chen said.

Among the seven leading indicator factors, the sub-indexes for export orders, money supply, stock prices and manufacturers' business sentiment moved higher in November, while the sub-indexes for employment, floor area of new construction projects, and imports of semiconductor equipment, moved lower.

Chen said AI has created "must-have" demand worldwide to boost Taiwan's exports and could push Taiwan into "red light" territory in the next few months, with the AI frenzy bringing both "opportunities and challenges."