Sat, Feb 27, 2010 page12

• Economic indicators flash ‘yellow-red’ a third month

  NO EXPANSION YET A senior TIER official said that the economy would not be ‘overheated’ until overall economic indicators flashed ‘red’ for three months

  • By Ted Yang / STAFF REPORTER
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  As the economy continues to regain momentum, the overall monitoring indicators for the nation’s economic climate flashed ­“yellow-red” last month for the third straight month, the Council for Economic Planning and Development (CEPD) said yesterday.

  Among the index’s nine components, non-agricultural employment turned “yellow-blue” after 13 months of flashing “blue” — signifying a recession — as it increased 0.7 percent last month from the same period a year earlier, the CEPD report showed.

  “The nation’s economy has shown signs of recovery, but not yet to the point of expansion,” Hung Jui-bin (洪瑞彬), director-general of the council’s economic research department told a media briefing.

  The non-agricultural employment sub-index stood at 2 points, snapping 13 straight months of posting 1 point, while the wholesale, retail and food service sales sub-index decreased 1 point, flashing “yellow-red,” the CEPD data showed.

  “The decrease in wholesale and retail sales was a result of the higher comparison base due to the release of consumer vouchers [last year] and lower auto sales last month after the preferential automobile excise taxes expired at the end of last year,” Hung said.

  The headline economic index stood at 37 points, coming close to the 38-point threshold for a “red” light, which represents overheating, solid indication that business activity has been revived.

  “Although the overall signal remained yellow-red for three months, that shouldn’t be interpreted as overheating,” Huang said, adding that a base effect should be taken into account.

  Taiwan Institute of Economic Research president David Hong (洪德生) said that the economy would be considered overheated only when the overall indicators flashed “red” for three months.

  “The nation’s economy is not overheating yet and inflation is not expected in the near future,” Hong said.

  Direct and indirect finance still flashed “blue,” with the index increasing 1.9 percent, up 0.4 percentage points from 1.5 percent in November, the report said.

  However, Hung said that direct and indirect finance has continued to grow at a modest pace, saying that its sub-index has increased for three months from the 0.9 percent growth posted in November.

  Hung expressed optimism about the nation’s economy as the global economy is expected to sustain its momentum over the next six months, which would lead to increased overseas demand.

  However, Standard Chartered Bank (Taiwan) Ltd (渣打銀行) said yesterday in a press statement that Taiwan may be at the peak of its current growth rebound and the pace of recovery could slow into the second half of this year, based on the one to two quarters’ lag in the data and weaker-than-­expected export orders and industrial production.

  Considering this, along with the risk of domestic inflation, Standard Chartered said central bank policy makers would be well-advised to take a cautious stance when they meet next month to decide on a benchmark policy rate, which Standard Chartered said it expected to remain steady at 1.25 percent.

  ADDITIONAL REPORTING BY JOYCE HUANG
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