Escalating fuel and raw material prices have taken their toll on the nation’s economy as the business cyclical indicators flashed a “yellow-blue” light last month, signaling a downside risk in economic growth, the Council for Economic Planning and Development (CEPD) said yesterday.
It is the first time in six months the government monitoring indicators took an alarming note, with consumer prices expected to climb higher later this year.
The leading index and the trend-adjusted coincident index dipped 0.2 percent and 0.5 percent last month respectively from the previous month.
Hung Jui-bin (洪瑞彬), director-general of the council’s economic research department, pinned the blame mainly on the lackluster showings in financial and manufacturing sectors.
“The overall monitoring indicator flashed yellow-blue in May after six consecutive months of green,” Hung told a media briefing. “But export and consumption indicators remained relatively stable.”
Among the seven indicators making up the composite index, only the stock price index reported positive cyclical movement from the previous month.
The indexes of export orders, building permits, industry and services, producer inventory and real monetary aggregates all had negative cyclical movements compared with April.
The coincident index stood at the same level as in April — 109.1 points — but its trend-adjusted series dropped 0.5 percent to 98.7 points. Only the sales index of wholesale, retail and food services registered positive cyclical movement from the previous month.
The remaining indicators on imports of machinery and electrical equipment, manufacturing sales, electric power consumption, industrial production, exports and nonagricultural employment all posted negative cyclical movements from April.
The total score declined 6 points to 21 points last month.
The figures showed the negative impact of surging oil and raw material costs on the economy has surfaced, Hung said.
While cautious about the economic prospects, Hung said he believed the government’s economic stimulus package and improved cross-strait relations would help reverse the trend, if the spending program could effectively boost domestic demand.
Norman Yin (殷乃平), professor in National Chengchi University’s Money and Banking Department, disagreed.
Yin said that because Taiwan depends heavily on trade with the US, the slowdown is likely to deepen in the second half of this year and beyond, since the US is not expected to recover from the subprime mortgage woes before the end of next year.
Yin said that while an expected increase in cross-strait tourism would help stimulate domestic consumption, it would not be potent enough to offset the harm caused by inflation.
President Ma Ying-jeou’s (馬英九) administration appeared inadequately prepared for the economic challenges from at home and abroad, Yin said.
Separately, a new survey also reflected weakening confidence in the nation’s economy over the next six months.
Consumer confidence weakened to a six-and-half-year low this month because of growing pessimism, primarily about the nation’s stock market outlook and inflation risk over the next six months, the latest survey released yesterday showed.
The index declined 1.07 to 60.23 this month, the survey by National Central University’s Research Center for Taiwan Economic Development showed.
This month’s stock market reading dropped the fastest among the six major sub-indexes to 64.70 from last month’s 71, the survey said.
The consumer price reading — a tool to measure a nation’s inflation risk — fell to 22.15 this month, hitting the lowest level since the survey started, the research center said in a statement. Last month, the reading was 23.15.
The reading for the economic outlook sub-index slid to 46.5 from last month’s 45.85, representing the third-biggest decline among the six major sub-indexes, the survey said.
Additional reporting by Lisa Wang
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