Economic indicator flashes blue in signal of Taiwan recession

Economic indicator flashes blue in signal of Taiwan recession

TAIPEI, Taiwan - The National Development Council's (NDC) economic monitoring indicator fell six points to 16 last month on the back of weak exports, flashing blue to signal a recession.

April's overall score took the light to blue for the first time since September 2012, said Wu Ming-huei, director of the NDC's Economic Development Department.

The NDC uses a five-colour spectrum to signal national economic health. Red warns of overheating and yellow-red of slight overheating. Green, yellow-blue and blue signal steady growth, slowdown and recession, respectively.

Wu said the NDC's March indicator score had been adjusted from 21 to 22 following a revised estimate on the producer's shipment for manufacturing.

The score fell in April primarily due to less-than-expected first-quarter global economic growth, coupled with a weakened demand for mobile devices.

The downward pressure on export orders has pushed down economic health indicators like industrial production, producer's shipments for manufacturing and the sales of trade and food services, Wu said.

Market confidence surveys indicate that the manufacturing sector has been conservative for several months, she said.

 Nine Components

The NDC bases its economic monitoring indicator on nine components. In April, the subindices for industrial production, nonagricultural employment and manufacturing each lost one point to turn from green to yellow-blue.

The subindices for sales of trade and food services also shed a point to switch from yellow-blue to blue, while the producer's shipment for manufacturing subindex lost two points to go from green to blue.

From March to April, light indicators for monetary aggregates M1B, TAIEX average closing price, customs-cleared exports and imports of machineries and electrical equipment remained unchanged.

Leading and Coincident Indicators

April's score of 16 is calculated based on the leading index - which forecasts economic climate three to six months ahead - and the coincident index, which reflects current conditions.

The NDC's index of coincident indicators fell by 0.55 percentage points from March to 99.29, according to the NDC report.

Of the seven leading subindices, only electric power consumption and nonagricultural employment showed positive cyclical movement from the previous month.

The NDC's leading index stood at 97.74 in April, down by 0.58 percentage points from the previous month.

Of the seven leading subindices, semiconductor book-to-bill ratio, the TAIEX and real monetary aggregates M1B put up positive cyclical movements. Export orders, building permits, manufacturing and net employment accession rate had negative showings.

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