Authors: Tain-Tsair Hsu（許添財）, Shin-Hsien Chen（陳世憲）

【Abstract】

The CDRI business cycle indicator shows that Coincidental Cyclical Composite Index for Service Industry (CCCIS) in April 2025 continued its decline in Q1 2025. The standardized Cyclical Composite Index dropped to -0.4828 Standard Deviations in April, and the forecast predicts a further decrease to -1.1683 Standard Deviations in October 2025. This trend indicates a very high risk of the Commercial Service Industry entering a recession in H2, which necessitates immediate and effective anti-recession measures.

Leading Cyclical Composite Index for Service Industry (LCCIS), which had previously bottomed out in June 2023 with its upward momentum increasing steadily. It moved out of the historical recession zone of -0.5 Standard Deviations in December 2023 and turned positive in June 2024, reaching 0.8504 Standard Deviations in April 2025. This indicates that the business cycle is expected to continue improving.

However, a “divergence” between the CCCIS and LCCIS has emerged once again, similar to when the pandemic caused a disruption. Notably, the decline in the CCCIS is happening at a much faster pace than the gradual upward movement of the LCCIS. It shows that the business cycle in the Commercial Service Industry is being influenced by factors different from the overall economy, requiring further exploration of the Industry’s internal structure or external disruptions to identify effective solutions.

There are some key points and policy implications regarding the current changes in Business Forecast for Taiwan’s Commercial Service Industry as follows:

1. Market supply-side reforms, particularly in the labor and financial markets.

2. The implementation of a comprehensive smart productivity revolution.

Observations and Analysis:

A.    A significant turning point in the current downward trend of the Commercial Service Industry’s business cycle occurred in Q4 2024.

a.     In Q3 2024, the Coincidental Cyclical Composite Index (CCCIS) was still on the rise. However, warnings had already been issued regarding signs of transition from stagnation to recession in the Accommodation and Catering Industry, as well as a noticeable deceleration in the growth of employment in the Service Industry since May, which posed a growing risk of downward movement in the business cycle. By Q4, the Real Estate and Residential Service Industry shifted to a downward trend, and even the sectors that had been maintaining an upward trajectory—namely the Wholesale and Retail Industry and the Real Consumption of Residential Services, Utilities, and Other Fuel Industries—showed signs of decelerating growth. These changes caused the overall index to reverse course and begin declining. This deterioration continued and worsened into Q1 this year.

b.     As for the leading indicators, only the Transportation and Storage Industry showed a downward trend in Q3 last year. But by Q4, the Net Entry Rate of Employees in the Commercial Service Industry and the Stock Price Index of the Commercial Service Industry had also turned downward. Moreover, the previously rising indicators—such as the Number of Initial Acceptances of Unemployment Benefits (inverted) and the Real GDP of the Finance and Insurance Sector—also showed slight slowdowns. Although the overall LCCIS has not yet reversed downward, changes in its internal structure could potentially impact the performance of CCCIS.

c.     A deeper examination of the market behavioral attributes of the indicators reveals that the key issues lie in:

(1)  The Labor Market: As of April this year, the Number of Employees in the Service Industry—a Coincident Indicator—has been declining for 14 consecutive months. The Net Entry Rate of Employees in the Commercial Service Industry—a Leading Indicator—also turned downward four months later. Meanwhile, the upward pace of the Number of the Initial Acceptance of Unemployment Benefits (inverted) has slowed. This aligns with earlier findings that growth in the Accommodation and Catering Industry was first hampered by labor shortages, which in turn explains the decreasing growth rate in overall Service Industry employment. These employment dynamics have fed back into the related Leading Indicators, either causing them to turn downward or to stall. Clearly, the supply side of the labor market is facing challenges, which are now impacting on the demand side. From a policy perspective, this suggests the urgent need for reforms to address labor market supply constraints. If the problem continues to deteriorate, it may eventually affect consumer demand and evolve into a broader economic recession.

(2)  The Financial Market: The Real GDP of the Real Estate and Residential Service Industry, a coincident sub-indicator, shifted to a downward trend in Q4 2024. This was largely due to the Central Bank implementing necessary policy measures to curb both “genuine” and “speculative” demand in the previously overheated Real Estate market. The current downturn in the Commercial Service Industry, combined with tighter monetary and credit policies, is now feeding back into the performance of Leading Indicators such as the Stock Price Index of the Commercial Service Industry.

(3)  Summary: The supply-side factors in both the labor market and financial market are likely the fundamental reasons behind the current divergence in the business cycle trend of the Commercial Service Industry, which differs in nature and cause from the previous cycle’s divergence caused by the pandemic’s disruption.

B.    Currently, Trump has initiated a tariff war, with the true aim of attempting to restore the long-lost and deeply eroded productivity advantage of the United States. This is certainly what Trump desires and, indeed, a necessary systemic “productivity revolution” that he must carry out.

The current situation and potential developments are set against an uncertain and unpredictable “journey.” Moreover, with the imminent risk of geopolitical conflicts that could ignite at any moment, it’s essential to be vigilant in preventing a further escalation into a “global economic war.” Taiwan is not only unable to remain unaffected by this but is also comparable to the epicenter of an economic war.

While Export Trade is undoubtedly the driving force behind our economic growth, the increase in tariffs will certainly impact on costs and prices. However, more fundamentally, Taiwan can leverage its semiconductor technology and abundant capital advantages to conduct a “leveraged industrial, service, and even agricultural” comprehensive smart productivity revolution. Only by significantly improving productivity can Taiwan withstand the challenges posed by this tariff war, and even the more severe “economic war” (including technology wars, financial wars, etc.). As the digital economy era arrives, Taiwan uniquely holds advantages and opportunities. It’s essential to adopt a long-term strategy for a comprehensive productivity revolution, while also addressing Taiwan’s longstanding issues related to institutional structure, resource allocation, and the serious imbalances in distribution.

1. Comprehensive analysis and prediction

CDRI finds that the Coincidental Cyclical Composite Index for Service Industry (CCCIS) has bottomed out in August 2022 of -1.0089 Standard Deviation. It peaked at 0.7253 Standard Deviations in April 2024 but dropped to -0.4828 Standard Deviations in April 2025. The forecast predicts it will continue to decline to -1.1683 Standard Deviations by October 2025. It’s clear that the Commercial Service Industry will continue its decline in H2, with the risk of entering a recession. (See Figure 1 and the appendix below)

Figure 1. “Tendencies and Forecasts of the Coincidental Cyclical Composite Index for the Service Industry”

Source: Business Cycle Forecasting Team, CDRI

Released by the Directorate-General of Budget, Accounting and Statistics (DGBAS): The economic growth rate for Q1 2025 stood at 5.48%. The main driver of economic growth is Private Investment, which increased by 20.77%, contributing 4.43%. Next, Net Exports grew by 5.58%, contributing 0.77%. Following that, Private Consumption rose by 1.36%, contributing 0.63%. This has resulted in a significant change in the structure of total expenditure, with Private Investment and Net Exports showing recovery momentum, while Private Consumption has shown relatively weak growth. Additionally, inventory changes have had a severe negative growth and contribution, which requires further attention to understand the underlying causes (See Table 1).

Looking at the contribution by Industry, In the 5.48% GDP growth rate for Q1 2025, the Service sector grew by 2.67%, significantly lower than the Industrial sector’s growth of 10.12%. At the same time, the Service Sector contributed 1.61% to GDP, clearly lower than the Industrial sector’s contribution of 3.81%, further highlighting the shift in the contribution of Industrial and Service sectors to economic growth.

Table 1. Q1 2025 economic growth rate and growth contribution rate, by sector

                                                                                                                                               Unit: Millions of New Taiwan Dollars; %

Source: Directorate-General of Budget, Accounting and Statistics, Executive Yuan, and the Business Cycle Forecasting Team of CDRI

Table 2. Q1 2025 economic growth rate and growth contribution rate, by industry

                                                                                                                                         Unit: Millions of New Taiwan Dollars; %

Source: Directorate-General of Budget, Accounting and Statistics, Executive Yuan, and the Business Cycle Forecasting Team of CDRI

2. Service industry business cycle outlook

【Regarding the indicator system】

The business cycle Composite Index system on the Time Series Analysis. We analyze the relevant economic indicators in the time series and select indicators based on their significance to the business cycle and stability of their cyclicality.  They are then classified into leading indicators, coincident indicators, and lagged indicators through the use of statistical analysis and verification.

The cyclical trend of the Composite Index of coincident indicators is shown to be highly correlated with the cyclical trend of the GDP, and the forecast value of the Composite Index of the coincident indicators, estimated by the Leading Indicator Composite Index, could be used to forecast the moving trends of the GDP.

The cyclical trend of economic indicators fluctuates around the long-term trend. The long-term trend value is normalized to 100; cyclical trend values greater than 100 indicate a recovery or prosperity stage while values below 100 indicate a recession or depression stage.

The standardized changes of the indicators’ cyclical trend values (in Standard Deviation units) are added up to become a Composite Index, and it fluctuates around the long-term trend value with a Standard Deviation of zero.

【Latest Indicator Trends】

The Leading and Coincidental Composite Indices Curve for this business cycle’s indicator system is shown in Figure 2.

Leading Cyclical Composite Index (LCCIS) has dropped from its peak of 0.8251 Standard Deviations in November 2021 to a trough of -0.7018 Standard Deviations in June 2023. It then rose steadily, reaching -0.0524 Standard Deviations in May 2024 and 0.8504 Standard Deviations in April 2025. This represents 22 consecutive months of increase, and its growth rate has not significantly slowed. However, the sub-indicators within it show varying upward and downward trends, which could still have different impacts on the Coincident Indicator.

Among the individual sub-indicators of the LCCIS, those showing a downward trend include “Real GDP of Transportation and Storage,” “Net Entry Rate of Employees in the Commercial Service Industry,” and “Stock Price Index of the Commercial Service Industry.” On the other hand, the sub-indicators showing an upward trend include “Private Real Fixed Capital Formation,” “Net Trade in Service Revenue and Expenditure,” “Initial Acceptance of Unemployment Benefits (inverted),” and “Real GDP of the Finance and Insurance Sector.”

The Coincidental Cyclical Composite Index (CCCIS) was directly impacted by the pandemic, dropping from its peak in August 2020 to a trough of -1.0089 Standard Deviations in August 2022. It then began to recover, reaching a peak of +0.7253 Standard Deviations in April 2024. However, it has since declined steadily, dropping to -0.0828 Standard Deviations in January 2025 and further to -0.4828 Standard Deviations in April 2025. If this downward trend continues, it’s forecasted to further decrease to -1.1683 Standard Deviations by October 2025, indicating that the risk of recession in the commercial service industry should not be underestimated (See Figure 1 above and the attached appendix).

Among the five sub-indicators, the ones showing a downward trend are “Accommodation and Catering Industry,” “Real Estate and Residential Service Industry,” and “Number of Employees in the Service Industry.” The only ones showing an upward trend are “Wholesale and Retail Industry” and “Real Consumption of Residential Services, Utilities, and Other Fuel Industries.”

Figure 2. Leading and Coincidental Cyclical Composite Index for the Service Industry

Source: Business Cycle Forecasting Team, CDRI

A. Leading indicator series

a. Business cycle trend of real GDP of the Transportation and Storage Industry has declined for 18 consecutive months, with the pace of decline accelerating, now falling below the long-term trend value (100), and the year-on-year growth rate has also continued to slow down, with the average growth rate for the last three quarters only at 1.83%, far lower than the average of 17.23% for the previous three quarters. The business cycle trend has experienced severe stagnation, and urgent countermeasures are needed to prevent further decline.

The cyclical trend value of this indicator reversed downward after ending a 24-month rise in October 2023. By April 2025, it had declined for 18 consecutive months, with the cyclical trend value falling to 94.45, remaining below the long-term trend value (100) for the past seven months. The downward trend still shows no signs of slowing.

However, the annual growth rate (YOY), calculated based on its actual value, reached as high as 45.3% in Q2 2023. However, it has slowed down continuously, and by Q1 2025, it had dropped to 2.9%. This is significantly lower than the average of 1.83% for Q3 and Q4 2024. This indicates that the business cycle trend is clearly continuing to decline, and immediate countermeasures are required.

Figure 3. The annual growth rate of Transportation and Storage GDP and business cycle trend, 2020Q1~2025Q1

Source: Business Cycle Forecasting Team, CDRI and Directorate General of Budget, Accounting and Statistics, Executive Yuan

b. This cyclical trend reversed in December 2023 and continued rising, and by April 2025, it had continued for 17 months, with the pace of growth showing no signs of slowing. The actual value also shifted to positive growth starting from Q2 2024, reaching 20.8% in Q1 2025. This is highly significant in the current context of the uncertainty surrounding Trump’s tariff war.

The cyclical trend value of this indicator bottomed out in November 2023 at 94.73, then began to rise steadily. After 17 months of growth, the trend value reached 107.21 by April 2025, and the growth rate continues to strengthen, indicating that a new wave of investment momentum is on the rise.

Additionally, the year-on-year growth rate, calculated based on actual values, turned negative from positive in Q2 2024, ending five consecutive quarters of negative growth. By Q4 2024, it had reached 17%, and in Q1 2025, it further increased to 20.8%. This clearly shows that domestic investment is starting to regain hope for a new wave of growth, which is highly valuable and significant given the current uncertainty caused by Trump’s tariff war.

Figure 4. Annual growth rate and cyclical trend of Private Real Fixed Capital formation, 2020Q1~2025Q1

Source: Business Cycle Forecasting Team, CDRI and Directorate General of Budget, Accounting and Statistics, Executive Yuan

c. The Net Balance of Trade in Services Revenue and Expenditure, which saw a rare surplus during the pandemic, has now reverted to the historical deficit norm. The deficit reappeared in Q1 2023 and continued to worsen, with the Net Balance dropping by as much as -375.7% YOY in Q4 2023. However, in Q1 to Q4 2024, the decline slowed to -38.6%, -84.5%, -8.9% and -0.1% respectively. Yet, in Q1 2025, the deficit expanded again to -32.3%. From a cyclical trend perspective, the trend reversed in October 2023, with the value rising from a trough of 83.17 in September 2023 to 123.4 in April 2025.

Looking at its actual GDP value, Taiwan’s Service Industry, which had enjoyed a rare trade surplus since Q2 2020, has encountered a reversal after 11 quarters. In Q1 2023, it reemerged as a trade deficit, with the total annual service trade deficit amounting to $10.07 billion USD. This is equivalent to 10.62% of the total Merchandise Trade Surplus of $94.881 billion USD during the same period. The service sector had a $12.275 billion deficit in 2024, 12.34% of the $99.416 billion commodity surplus. In Q1 2025, the service trade deficit further widened to $2.979 billion, accounting for 10.93% of the merchandise trade surplus of $27.234 billion.

Figure 5. Annual growth rate and cyclical trend of net trade in Services Revenue and Expenditure, 2020Q1~2025Q1

Source: Business Cycle Forecasting Team, CDRI and Directorate General of Budget, Accounting and Statistics, Executive Yuan

d. Initial Acceptance of Unemployment Benefits (inverted) indicates that the overall pressure on labor demand is continuing to rise.

The unemployment rate is a lagging indicator of the business cycle, while Initial Acceptance of Unemployment Benefits can predict the unemployment rate. This lagging indicator can, in turn, predict leading indicators. Therefore, the Initial Acceptance of Unemployment Benefits (inverted) can be seen as a leading indicator of the business cycle. Employment is a coincident indicator of the business cycle, so the Initial Acceptance of Unemployment Benefits (inverted) can also predict employment trends.

The cyclical tendency of this sub-indicator reached its peak in May 2022, with an index of 110.14, showing a rapid recovery in labor demand. However, it began to decline afterward. By May 2023, the Initial Acceptance of Unemployment Benefits (inverted) dropped below the long-term trend value of 100. By January 2024, it had fallen to 95.62. It then reversed and began to rise, signaling the end of the downward trend in labor demand. As of April 2025, the value had risen to 100.71, indicating that the trend in labor demand continues to improve.

Figure 6. Number of the initial acceptance of unemployment benefits (inverted) and the annual growth rate and cyclical trend January 2020 to April 2025

Source: Business Cycle Forecasting Team, CDRI and Directorate General of Budget, Accounting and Statistics, Executive Yuan

e. Net Entry Rate of Employees in the Commercial Services Industry peaked in June 2024, and has since declined, indicating that the trend of employment changes in the Service Industry is slowing down.

The cyclical tendency of this sub-indicator hit the bottom in January 2023, with a cycle index of 97.63, then began to rise, reaching a cyclical trend value of 100.98 as of June 2024, However, it reversed and started to decline, falling to 100.27 by April 2025, signaling that the expansion of employment in the Commercial Service Industry is facing difficulties.

Figure 7. Annual changes and cyclical trends in the net entry rate of Employees in the Commercial Service Industry, January 2020 to March 2025

Source: Business Cycle Forecasting Team, CDRI and Directorate General of Budget, Accounting and Statistics, Executive Yuan

f. The declining trend of the Commercial Services sector’s Stock Price Index showed a declining business cycle trend, which bottomed out in May 2023 and then rebounded, reaching a peak in October 2024. However, it has since declined for six consecutive months through April 2025.

The cyclical tendency of this sub-indicator ended a 19-month decline in May 2023 and then rose for 17 months, peaking at 100.81 in October 2024. Afterward, the trend began to decline again, and by April 2025, the business cycle trend value had fallen to 99.47, with the pace of decline accelerating.

An indicator is the annual growth rate of the actual Stock Price Index. It turned negative in May 2022, and the decline continued to expand, with a drop of over 30% from September to November. In December 2022, and January 2023, the decline remained in double digits at -24.7% and -19.2%, then turned to single-digit negative growth. From May 2023 to April 2024, the growth rate fluctuated between positive and negative single-digit values. From May to December 2023, the index showed positive growth, reaching a peak of 15.1% in October. However, the rate of increase slowed, and since the beginning of 2025, it has shown negative growth, with the year-on-year growth rate dropping to -10.3% in April 2025. This clearly indicates that the business cycle trend is in a downward movement.

Figure 8. The annual growth rate and circular trend of the Stock Price Index of the commercial service industry, January 2020 to April 2025

Source: Business Cycle Forecasting Team, CDRI and Directorate General of Budget, Accounting and Statistics, Executive Yuan

g. The real GDP growth rate in the Finance and Insurance Sector had four consecutive quarters of negative growth and turned positive since Q2 2022. The economic cycle trend has been steadily rising since hitting a low in February 2023. During the same period, the cyclical trend has continuously risen since bottoming out in February 2023, reaching an unprecedented high of 102.47 by April 2025, although the pace of growth has slightly slowed.

The cyclical tendency of this sub-indicator peaked at 103.02 in June 2021, then declined, falling below the long-term trend value of 100 in April 2022, and reaching a trough of 96.6 in February 2023. After reversing, it has steadily climbed and reached 102.47 in April 2025, but the rate of increase has notably slowed since H1 last year.

Looking at the year-on-year growth rate of this indicator, it began to decline in Q2 2022 but turned positive in Q2 2023. The growth rate peaked at 17.1% in Q1 2024, then gradually slowed, dropping to 6.4% by April 2025. This confirms that the cyclical trend continues to rise, but the pace of growth has moderated.

Figure 9. Annual growth rate and cyclical trend of real GDP of Finance and Insurance Sector, 2020Q1~2025Q1

Source: Business Cycle Forecasting Team, CDRI and Directorate General of Budget, Accounting and Statistics, Executive Yuan

B. Coincident indicator series

a. The real GDP cyclical trend and actual values of the “Real GDP Index of Wholesale and Retail” has shown eight consecutive quarters of growth, signaling a steady and gradual recovery in the economy.

The cyclical trend value of this indicator hit a trough of 98.79 in April 2023. Since then, it has risen for eight consecutive quarters. The pace of growth was particularly fast before March 2024, but then slowed gradually, reaching 100.96 in April 2025, indicating a stable and ongoing recovery in the economy.

The real GDP year-on-year growth rate for this sector turned positive in Q2 2023, with a growth rate of 0.9%. It increased by 0.6% and 3% in Q3 and Q4 2023, respectively. In Q1 and Q2 2024, growth further increased to 5.4% and 5.3%, but then slowed to 4.6% and 2.8% in Q3 and Q4. In Q1 2025, growth reached 3.3%, signaling that the industry is still steadily recovering.

Figure 10. Annual growth rate and cyclical trend of real GDP Index of Wholesale and Retail, 2020Q1~2025Q1

Source: Business Cycle Forecasting Team, CDRI and Directorate General of Budget, Accounting and Statistics, Executive Yuan

b. “Real GDP of the Accommodation and Catering Industry” bottomed out in August 2021 and continued to rise but peaked in July 2023. Since then, the cyclical trend has declined for 21 consecutive months, indicating that the economic recovery has slowed and faced obstacles. In terms of actual values, the industry experienced negative growth in Q2, Q3, and Q4 of last year, with only a 0.4% growth in Q1 2025, indicating that the business cycle is now in a “technical recession.”

The cyclical tendency of this sub-indicator hit the bottom in August 2021, leading the economic recovery. The cyclical index steadily rose from the trough of 92.75, surpassing the long-term trend value of 100 by September 2022. In July 2023, the cyclical index reached its peak at 105.18. It then reversed its rise and started to decline, with the cyclical trend value falling to 94.55 by April 2025. Meanwhile, the standardized cyclical trend value had dropped to -2.2847 Standard Deviations in April 2025. Historical business cycle experience shows that the Accommodation and Catering Industry has entered a phase of recession.

The actual annual growth was severely impacted by the pandemic, it once reached its lowest point at -30.5% in Q3 2021. It then started to rebound, but the growth rates in each quarter fluctuated. In Q3 2022 and Q2 2023, there were exceptionally high growth rates of 47.4% and 38%, respectively. In Q3, there’s still a 13.5% growth rate, and 10.6% in Q4. However, in 2024, the growth rate decreased to 3.3% in Q1, and the industry saw negative growth in Q2, Q3, and Q4 with rates of -0.7%, -3.2%, and -0.7%, respectively. In Q1 2025, the growth rate was only 0.4%, indicating a clear decline in the business cycle.

Figure 11. The annual growth rate and circular trend of real GDP in the Accommodation and Catering Industry, 2020Q1~2025Q1

Source: Business Cycle Forecasting Team, CDRI and Directorate General of Budget, Accounting and Statistics, Executive Yuan

c. Real GDP of Real Estate and Residential Service Industry business cycle trend showed a recovery from the low point in December 2022, reaching a peak in April 2024, but has now declined for 12 consecutive months by April 2025. During the same period, the year-on-year growth rate of actual values, which peaked at 6% in Q4 2023, has gradually slowed down, turning negative to -0.7% in Q1 2025.

The cyclical trend of this indicator has shown slight fluctuations over the long term, with the index peaking at 100.51 in January 2021. It then began a slight decline, falling below the long-term trend value of 100 in February 2022 and continuing downward, reaching a trough of 99.25 in December 2022. After reversing and rising, the cyclical trend value reached a peak of 100.6 in April 2024. However, it reversed downward again, dropping to 99.13 by April 2025, with the pace of decline gradually accelerating.

In terms of the year-on-year growth rate of actual values, from Q1 2020 to Q1 2025, only Q1 2023 and Q1 2025 experienced negative growth rates of -0.8% and -0.7%, respectively.

Figure 12. Annual GDP growth rate and cyclical tendency of Real Estate and Residential Service Industry, 2020Q1~2025Q1

Source: Business Cycle Forecasting Team, CDRI and Directorate General of Budget, Accounting and Statistics, Executive Yuan

d. The economic trend of Real consumption of “Residential Services, Utilities, and Other Fuel Industries” has shown long-term stability with slight fluctuations. However, since October 2020, the cyclical trend has slightly declined for 27 months, bottoming out in April 2023, and then showing a 24-month recovery from May 2023 to April 2025, indicating that the economy has steadily continued to advance.

The cyclical trend of this indicator has fluctuated slightly in the long term, never experiencing negative growth, but the rate of growth still follows a “growth cycle.” The cyclical trend reached a peak in September 2020 with a value of 100.29, then gradually declined, reaching a trough of 99.76 in April 2023.As of April 2025, it reached 100.21, although the pace of increase has slightly slowed since the beginning of this year.

Furthermore, the real annual growth rate has shown growth in every quarter since 2020, but the growth rate has fluctuated within a narrow range, with the highest rate being 3.1% in Q2 2020 and the lowest at 0.9% in Q2 2022. The changes for each quarter are shown in the graph below.

Figure 13. Real Consumption of Residential Services, Utilities, and Other Fuel Industries, 2020Q1~2025Q1

Source: Business Cycle Forecasting Team, CDRI and Directorate General of Budget, Accounting and Statistics, Executive Yuan

e. Number of employees in the Service Industry has been rising steadily since June 2022. It returned to above the long-term trend value (100) in May 2023. It peaked at 100.33 in February 2024. However, the cyclical trend reversed downward after that, and by April 2025, the trend value had fallen to 99.79, indicating a 14-month decline.

The cyclical trend of this indicator bottomed out in May 2022, with the index at 99.48. After that, the upward trend gradually strengthened, surpassing the long-term trend value (100) in May 2023. The peak occurred in February 2024, and since then, the trend has reversed downward, reaching 99.79 by April 2025 (with a standardized cyclical deviation of -1.0889 Standard Deviations).

The year-on-year growth rate of actual values has been positive since December 2022, with the growth rate steadily increasing from 0.1% in December 2022 to 2.5% in September and October 2023. However, the growth rate has since slowed, reaching only 0.4% in November and December 2024. The year-on-year growth rate for the first four months of 2025 has been between 0.5% and 0.6%. This reflects concerns over slow employment growth in the recovery phase, driven by increased labor shortages.

Figure 14. The growth rate and cyclical tendency of The Number of Employees in the Service Industry, January 2020 to April 2025

Source: Business Cycle Forecasting Team, CDRI and Directorate General of Budget, Accounting and Statistics, Executive Yuan

C. Lagged indicator series

The lagged indicator includes Real Consumption of Tobacco and Alcohol, Real Consumption of Clothing, Footwear, and Apparel, Real Consumption of Furniture, Equipment, and Housekeeping, and the Number of Initial Recognition and Acceptance of Unemployment Benefits. The Lagged Index can be used as a reference for observing whether a business cycle is over. This article omits relevant analysis.

Appendix

Business Cycle Coincident Composite Index for Taiwan Service Sector