Commerce Development Research Institute released the Business Cycle Coincident Composite Index for Taiwan Service Sector which indicates continuing slow down in Q1 next year and might stop in April.
  The forecasted coincident composite index fell all the way down from July and continued to decline in March next year, but there was a slight rebound signal in April. After the release of the government's GDP data for Q3, coupled with the "October stock market crash" and its subsequent impact, the indicators have turned bad, and the Private Real Fixed Capital Formation has continued to rise. It is clear that the government's digital economy and other related new industrial policies, as well as the resurgence of Taiwanese businessmen in the wake of the US-China trade war transfer-order-effect,  is the only hope for the recovery.

A. The actual value of the service industry leading indicators fell sharply after hitting the top in March this year and has dropped by eight months from November.
  The actual value of Cyclical Leading Composite Index for service industries（cycle value of long-term trend excluded）peaked in March this year and then fell all the way. Its cycle index has fallen from 99.98 in March to 98.63 in August and rebounded slightly to 98.69 in September. However, the valuations fell again in October and November, the valuation in November was 97.85, which fell back to the level of September last year.
  At the same time, the actual cycle value of the coincident composite index peaked in May this year, and then fell to 100.1445 in September, 99.8653 in March next year, slightly rebounding to 99.8745 in April, returning to the level of November last year (picture below). It shows that the business trend of Taiwan's commercial services industry is slowly declining and may be more volatile in the future.
  The trend of leading indicators and coincident composite index shows that the service industry has not returned to the level of the long-term trend since the recovery began in May last year. Bold economic stimulus measures should be taken. Also, as the digital transformation has become the trend of the times, now we have a concrete and effective theoretical and practical basis. The US-China trade war transfer-order-effect also provides a chance to solve economic problems.

The recent trend of Coincident indicator cycle index

B. The six sub-indicators of the leading indicators are still showing signs of weak employment. Moreover, the service industry's trade balance has fallen back to the level of September last year in September. The stock market continued to decline in November after the” October stock market crash”. In Q3, it was found that transportation and warehousing also began to decline, only the  Private Real Fixed Capital Formation continues to rise and plays the role of the mainstay. Although the strength is not enough to make up for all, the leading indicator composite index continues to decline, and it is expected that the return of Taiwanese businessmen will play a significant role.
 
C. sub-indicators of coincident index trend vary in different sectors; the composite index has continued to decline in June this year.
  Taiwan's service industry continued its recovery in May 2017, and the actual value of the Coincident Cyclical Composite Index (excluding long-term trend) has been rising to May this year. However, then the actual value began to decline in June and has dropped to 100.144 in September. The coincident composite index predicted by the leading indicator composite index will continue to decline and is forecast to fall to 99.87 in April next year.
The sub-indicators in the coincident indicators of the indicator system (which can synchronously reflect the real GDP changes in the service industry), however, see different trends in different sectors.

(Business Cycle Indicator System is designed, instructed and analysed by professor Tain-Tsair Hsu)

 Business Cycle Coincident Composite Index for Taiwan Service Sector

Business Cycle Composite Index for Taiwan Service Sector

Source：Business Cycle Forecasting Team, CDRI

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