COVID-19 is rapidly spread worldwide until today severely blocks moblity that cause numerous countries’ fallen into a "technical recession". However, Taiwan is one of the countries that keeps having positive growth. Of the 0.78% economic growth rate in the first half of this year, a closer look at the sources of contributions from various sectors revealed that it was mainly fixed investment. For other sectors, the net output is only 0.15%, the government consumption is only 0.14% and the private consumption is negative 1.7%.

     The growth rate this time is also thanks to the result of the success of domestic pandemic prevention and the government's efforts to bail out and revitalize policies. Only from the growth contribution of the aforementioned departments can see its structural hidden concerns. The main private investment growth contributed by the return of Taiwanese businessmen and the development of the new economy is only 0.47%. The growth contribution rate of inventory changes is 1.07%, which should be due to the inventory backlog caused by insufficient demand, especially the net output growth contribution rate of only 0.15%.The contribution rate of private consumption growth is -1.7%, and the embarrassment that domestic demand is expected to replace insufficient external demand. 

 　　Commerce Development Research Institute（CDRI）released the Business Cycle Coincident Composite Index for Taiwan Service Industry today (4th September), shows the economic situation currently hit by the pandemic cannot be effectively reversed, Taiwanese economy will gradually approach the risk of a "technical recession" in the first quarter of next year. If the pandemic blocks human mobility in the world, god has closed one door for us, then the explosive development of the digital economy 5G smart technology is also opening another window. What the government can do right now is to help private sector establish the infrastructure and various system platforms required for the development of shared digital economic wisdom and technology. What we do for government opportunities and opportunities is to help the private sector establish the infrastructure and various system platforms required for the development of shared digital economic wisdom and technology.

Figure 1. Business Cycle Peer Index Composite Index Trend and Prediction

 Explanation: According to the historical experience of this system, the change of the standardized cyclic composite index indicates that upward movements indicate rising business conditions (recovery), downward movements indicate falling business conditions (slowness or decline), between 0 and 1.5 σ indicates recovery, and more than 1.5 σ indicates prosperity; between 0 and negative 1.5 σ Slowness or recession, below 1.5 σ indicates depression. 

A) The actual value of the Cyclical Leading Composite Index for Service Industries starts to fall since January 2019, from +0.384 standard deviation to July, 2020 -0.8341 standard deviation.

The reason is that among the sub-indices it contains, the "real private fixed capital formation" started to stop falling in April 2018. Since then, the business cycle index has continued to climb. It began to exceed the long-term trend value (100) in March 2019, and then went up. Strengthening, it has come to 101.17 by November 2019. However, the trend of high expectations this year changed due to the epidemic, and even stopped rising and then declined. The index fell back to 100.13 in July.

B) The overall Commercial Service Industry Business Cycle Composite index analysis and prediction was changed in the first quarter of 2020 when the global pandemic spreads and affected. The standardized composite index is expressed in unit change standard deviation, from a positive 0.28 standard deviation (σ) at the peak in February 2019 to a negative 0.65 standard deviation (σ) in July this year. If the situation has not been reversed, it is predicted that it will continue to fall to a negative 1.1 standard deviation in January next year, which is gradually approaching the "declining zone" of traditional experience. (risk of -1.5 standard deviations).

In addition, under the continuous impact of the pandemic, not only private investment has become a little unsustainable, but transportation, storage, and financial insurance are also on a downward trend. The booming employment last year now represents the leading indicator of future employment trends, regardless of whether the initial acceptance of unemployment benefits (inverted) or the net entry rate of employees in the business service industry has declined. Only the balance of trade in services and the stock price index of the business services sector rose against the trend.

Schedule

 Business Cycle Coincident Composite Index for Taiwan Service Sector

Figure

Business Cycle Composite Index for Taiwan Service Sector

Source: Commerce Development Research Institute

Previous Cycles: