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 July 2025 continued its decline in H1 2025. The standardized Cyclical Composite Index dropped to -0.3137 Standard Deviations in July, and the forecast predicts a further decrease to -0.7340 Standard Deviations in January 2026. Although the pace of decline has slowed compared to previous forecasts, a closer examination of sub-indicators reveals widening divergence and increasingly unbalanced recovery across different segments. While aggregate figures suggest the downward pressure has eased, the Diffusion Index shows no signs of convergence, leaving considerable uncertainty and risks of continued recession for the Service Industry.

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

A.            Overall Economic Performance:

1.   External Heat, Internal Warmth

a.   Taiwan’s GDP grew by 6.75% in H1 2025. Net Exports contributed 3.16%, nearly equal to the combined contribution of Private Consumption, Government Consumption, Private and Government Investment, Government-Operated Enterprise Investment, and Inventory Changes (3.24%), with only a slight difference of 0.08%. Excluding Government Investment and Consumption, the contribution of Net Exports exceeds the combined total of Private Consumption, Private Investment, and Inventory Changes by 0.31%.

b.   The contribution to growth in the value of services with a domestic sales orientation (1.69%) is much lower than that of industrial output with an export-oriented focus (4.81%), with a difference of 3.12% between the two.

2.   The uneven recovery has become more divergent, highlighting the high uncertainty of business cycle fluctuations:

a.   Among the five sub-indicators of the Coincident Indicator, three are declining and two are rising. The total change in the downward business cycle trend values is -4.9251 Standard Deviations, while the total change in the upward trends is 3.3565 Standard Deviations. The indicators for Wholesale and Retail Industry, Residential Services and Utilities, and Other Fuel Industries are rising, while those for Accommodation and Catering Industry, Real Estate and Residential Service Industry, and the Number of Employees in the Service Industry are declining. This shows that the recovery across different industry sectors is even more uneven, moving toward divergence.

b.   Among the seven sub-indicators of the Leading Cyclical Composite Index, four are rising and three are declining. The total change in the upward business cycle trend values is 6.2199 Standard Deviations, while the total change in the downward trends is -2.5638 Standard Deviations, with the Composite Index continuing to show an upward trend. The declining indicators include Real GDP of the Finance and Insurance Sector, Stock Price Index of the Commercial Service Industry (Finance Sector), and Real GDP of the Transportation and Storage Industry (Transportation and Logistics Sector). The rising indicators include Private Fixed Investment (Equipment and Construction Sector), Net Trade in Service Revenue and Expenditure (Trade Sector), Number of the Initial Acceptance of Unemployment Benefits (inverted), and Net Entry Rate of Employees in the Commercial Service Industry (Employment Sector). This also shows that the recovery across different industry sectors is even more uneven and increasingly divergent. The financial sector’s economic trends are moving toward decline, while the investment sector is trending upward, creating a reverse trend in supply and demand for capital, which could influence future developments and should be closely monitored.

3.   The current fluctuations in the business cycle are a mixture of internal structural changes and external shock factors.

a.   The business cycle trend in the Commercial Service Industry began diverging from the Leading Cyclical Composite Index in May 2024, shifting from an upward to a downward trend. This change originated from the labor shortage crisis in the Accommodation and Catering Industry, which caused a downturn in the economy. This subsequently spread to the Real Estate and Residential Service Industry, triggered by the Central Bank’s implementation of seven waves of “selective” credit controls over the past four years to curb soaring housing prices and excessive concentration of credit risks in the Real Estate sector. These measures led to a shift in the expectations of homebuyers, causing a decline in the Real Estate Sector, along with a drop in the number of employees in the Service Industry.

The impact of the pandemic and changes in consumer behavior led to the rise of the low-touch economy and gig economy, supported by the advancement of digital and mobile technologies, resulting in changes to employment patterns and a clear emergence of structural labor shortages. At the same time, rising prices weakened effective demand. Increased costs and reduced demand severely impacted the domestic market. The Central Bank’s credit control cooled the real estate market, which can be seen as a policy-driven external factor. As a result, the Coincident Indicator of the business cycle declined, diverging from the Leading Indicator.

b.   The trade war and Net Export growth imply sectoral and time-lagged contradictions. Trump’s comprehensive yet discriminatory tariff war against the world has had both direct and indirect impacts on Taiwan’s export trade. Coupled with the “ongoing negotiations” and changes in the trade policies of countries outside the U.S., this will create enormous uncertainty and risks with varying degrees of impact and time lags for different industrial sectors in Taiwan.

B.            Policy Implications of the Current Business Cycle Trend Changes:

1.   Facing the uneven recovery and uncertainty risks caused by structural and external shocks, it is clearly insufficient to wait for the system to adjust on its own, nor can simple aggregate fiscal expansion and monetary easing policies effectively address the issue. The government and businesses must engage in full communication and cooperation, adopting reforms that ensure rational and effective resource allocation while also facilitating industrial upgrading and transformation. Furthermore, these reforms need to align with new strategic actions that make short-term adjustments to changes in the international trade market and long-term deployment plans. In short, this is a period full of challenges and opportunities.

2.   If the necessary reforms and actions are not swiftly and effectively implemented to address the implications highlighted by the trends above, the potential for a currency war following the trade war could exacerbate the impact on Taiwan’s economy, adding fuel to the fire.

3.   Taiwan possesses relatively strong technological capabilities and financial resources overall, making it a country with considerable strength and high standing. However, due to institutional and policy factors, the long-standing issues of unequal wealth distribution and ineffective resource mobilization remain a hidden concern. There is an urgent need for collaboration between the government and businesses, utilizing forward thinking and strong execution to present solutions that leverage potential advantages and transform crises into opportunities.

1. Comprehensive analysis and prediction

CDRI finds that the Coincidental Cyclical Composite Index for Service Industry (CCCIS) reached -0.3137 Standard Deviations in July. The forecast predicts it will continue to decline to -0.7340 Standard Deviations by January 2026.

The CCCIS presented in July is not as severe as the previously forecasted -0.8643 Standard Deviations. Upon closer inspection, this is not due to an improvement in the overall business cycle trend but rather the result of a more divergent and uneven recovery across sectors. The implied volatility and uncertainty risks remain significant and shouldn’t be underestimated. For the Commercial Service Industry, it is still essential to view the situation through the lens of ongoing recession risks. (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 H1 2025 stood at 6.75%. The main driver of economic growth is Private Investment, which increased by 18.23%, contributing 3.9%. Following that, Net Exports showed a significant “revival,” growing by 26.21%, contributing 3.16%. Private Consumption, however, weakened, growing by 0.9%, contributing 0.44%. Over the past six months, a significant shift in the structure of total expenditure has occurred, resulting in an “external heat, internal warmth” phenomenon. Private Investment and Net Exports have regained strong momentum, while Private Consumption has lagged, and Inventory Changes have shown severe negative growth, contributing -1.49%, which requires further attention to understand the underlying causes and potential impacts. (See Table 1).

Looking at the contribution by Industry, in the 6.75% GDP growth rate for H1 2025, the Service sector grew by 2.78%, significantly lower than the Industrial sector’s growth of 12.69%. At the same time, the Service Sector contributed 1.69% to GDP, clearly lower than the Industrial sector’s contribution of 4.81%, further highlighting the shift and imbalance in the contributions of Industrial and Service sectors to economic growth.

Table 1. H1 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. H1 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.

The latest Leading Cyclical Composite Index (LCCIS) reached 0.5223 Standard Deviations in July. This marks a decline from the peak of 0.8395 Standard Deviations in November 2021, reaching a trough of -0.6920 Standard Deviations in June 2023. Since then, the index has steadily rebounded, reaching -0.0602 Standard Deviations in May 2024, and further rising to 0.5223 Standard Deviations in July 2025.

This represents 25 consecutive months of increase, although its growth rate has slightly slowed down this year. However, the sub-indicators within it show varying upward and downward trends, reflecting the volatility and uncertainty of business cycle fluctuations. The uneven recovery and divergent paths across different sectors may also have distinct impacts on the Coincident Indicator in the future.

Among the seven sub-indicators of the LCCIS, three showing a downward trend, including “Real GDP of Transportation and Storage (-1.7770 Standard Deviations),” “Stock Price Index of the Commercial Service Industry (-0.5042 Standard Deviations),” and the newly downward trending “Real GDP of Finance and Insurance (-0.2826 Standard Deviations).” On the other hand, the sub-indicators showing an upward trend include “Private Real Fixed Capital Formation (2.2030 Standard Deviations),” “Net Trade in Service Revenue and Expenditure (3.2194 Standard Deviations),” “Initial Acceptance of Unemployment Benefits (inverted) (0.1560 Standard Deviations),” and the newly reversed upward Net Entry Rate of Employees in the Commercial Service Industry (0.6415 Standard Deviations).”

The latest Coincidental Cyclical Composite Index (CCCIS) dropped to -0.3137 Standard Deviations in July. After recovering post-pandemic, it peaked at 0.6623 Standard Deviations in April 2024, followed by a steady decline, dropping to -0.0365 Standard Deviations in March 2025, and further falling to -0.3137 Standard Deviations in July, marking a significant decrease.

If this downward trend continues, it’s forecasted to further decrease to -0.7340 Standard Deviations by January 2026. Comparing individual sub-indicators, there is an uneven recovery, with divergence widening. Among the sub-indicators, two that are still rising have accelerated in recovery, while three that are declining have seen their decline rates intensify. Overall, the actual business cycle composite index of -0.3137 Standard Deviations in July is lighter than the previously forecasted -0.8643 Standard Deviations. However, based on the spread of the trends, the Commercial Service Industry’s economy is still not out of recession risk. (See Figure 1 above and the attached appendix).

Among the 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,” with their business cycle fluctuations presenting -1.5395, -2.1483, and -1.2373 Standard Deviations, respectively. The sub-indicators showing an upward trend are “Wholesale and Retail Industry” and “Real Consumption of Residential Services, Utilities, and Other Fuel Industries.” with their business cycle fluctuations at 2.1423 and 1.2142 Standard Deviations, respectively.

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 21 consecutive months, and the downward trend shows no sign of easing. Since November 2024, it has been below the long-term trend value (100), with the business cycle fluctuation dropping to -1.7770 Standard Deviations. The actual year-over-year growth rate has also continued to slow down, with the average growth rate of the last four quarters dropping to only 1.15%. The sluggish business cycle fluctuation indicates a severe delay, necessitating the formulation of countermeasures to prevent further decline.

The cyclical trend value of this indicator reversed downward after ending a 24-month rise in October 2023. By July 2025, it had declined for 21 consecutive months, with the cyclical trend value falling to 94.55, remaining below the long-term trend value (100) for the past nine 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 slowed down continuously, and by Q2 2025, it had dropped to 1.3%. The average growth rate for the last four quarters is now only 1.15%. 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, 2020Q1~2025Q2

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

b. This cyclical trend reversed upward in December 2023 and continued to rise for 20 months as of July 2025, with its growth rate showing no signs of slowing. The year-over-year growth rate (yoy) also turned positive starting in Q2 of 2024, ending five consecutive quarters of negative growth. By Q2 of 2025, the average growth rate over the last four quarters has reached 15%. This holds significant positive value and meaning, especially amid the uncertainty caused by the ongoing trade war initiated by Trump.

The cyclical trend value of this indicator bottomed out in December 2023 at 94.17, then began to rise steadily. After 19 months of growth, the trend value reached 107.77 by July 2025, and the growth rate remains strong. The standardized business cycle fluctuation index has risen to 2.2030 Standard Deviations, indicating that the new wave of investment enthusiasm is still 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 Q2 of 2025, the average growth rate for the last four quarters has reached 15%, signaling that the 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, 2020Q1~2025Q2

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 and Q2 2024, the decline slowed to -37.2% and -83.5% respectively, and by Q2 of 2025, the average for the last four quarters was -12.7%. The narrowing of the deficit indicates that the business cycle trend value reversed its decline and began to rise again in October 2023, moving from a low of 83.53 in September to 119 in July of this year. Given the steep upward trend, the standardized business cycle fluctuation index reached 3.2194 Standard Deviations in July 2025. However, the share of service trade deficits in relation to merchandise trade surpluses has not improved.

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 $10.09 billion USD. This is equivalent to 10.55% of the total Merchandise Trade Surplus of $95.617 billion USD during the same period. The service sector had a $12.173 billion deficit in 2024, 12.24% of the $99.416 billion commodity surplus. In H1 2025, the service trade deficit further widened to $7.351 billion, accounting for 11.61% of the merchandise trade surplus of $63.299 billion. This indicates that the share of service trade deficits in relation to merchandise trade surpluses has not significantly improved.

Figure 5. Annual growth rate and cyclical trend of net trade in Services Revenue and Expenditure, 2020Q1~2025Q2

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, although the fluctuation is not significant.

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. It bottomed out in January 2024, with the trend value dropping to 95.62. Afterward, it reversed upward, indicating that the downward trend in labor demand had ended. As of July 2025, the trend has risen to 100.88, suggesting that labor demand continues to rise, albeit at a slow pace. The standardized business cycle fluctuation index is only 0.156 Standard Deviations.

Figure 6. Number of the initial acceptance of unemployment benefits (inverted) and the annual growth rate and cyclical trend January 2020 to July 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 has shown a continuous upward trend, although the increase has been modest. The standardized business cycle fluctuation index has only reached 0.6415 Standard Deviations.

The cyclical tendency of this sub-indicator hit bottom in January 2023, with a cycle index of 97.61, then began to rise, reaching a cyclical trend value of 101.52 as of July 2025. While the trend value continues to rise, the increase is gradual, and the standardized business cycle fluctuation index has only reached +0.6415 Standard Deviations.

Figure 7. Annual changes and cyclical trends in the net entry rate of Employees in the Commercial Service Industry, January 2020 to June 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 September 2024. Since then, it has been declining for 10 consecutive months, with the rate of decline slightly accelerating, warranting close attention.

The cyclical tendency of this sub-indicator ended a 19-month decline in May 2023 and then rose for 17 months, peaking at 101.35 in September 2024. Afterward, the trend began to decline again, and by July 2025, the business cycle trend value had fallen to 97.36, with the pace of decline accelerating. However, the standardized business cycle fluctuation index has only dropped to -0.5042 Standard Deviations, which may indicate the initial signs of an economic downturn, and thus warrants close monitoring.

Additionally, looking at the actual stock price index’s year-over-year growth rate (yoy), it showed positive growth from May to December last year, peaking in October with a growth rate of 15.1%. However, the growth rate then slowed down and turned negative this year, worsening over time. By July 2025, the year-over-year growth rate had dropped to -15.3%, clearly indicating a downturn in the business cycle.

Figure 8. The annual growth rate and circular trend of the Stock Price Index of the commercial service industry, January 2020 to July 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. However, it quickly peaked at 17.1% growth in Q1 of 2024, and then slowed down each quarter. During this period, the business cycle trend reached its bottom in February 2023 and continued to rise, peaking in September 2024. As of July 2025, the cycle index has fallen to 99.57, below the long-term trend value of 100. The standardized business cycle fluctuation index has dropped to -0.2826 Standard Deviations, which may indicate the initial signs of a downturn and thus warrants attention.

The cyclical tendency of this sub-indicator peaked at 103.02 in June 2021, then declined, reaching a trough of 96.69 in February 2023. After reversing and rising for 19 months, it peaked again in September 2024, and as of July 2025, the trend value has decreased to 99.57.

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 1.1% by July 2025. This confirms that while the business cycle trend continues to rise, the pace of growth has slowed each quarter.

Figure 9. Annual growth rate and cyclical trend of real GDP of Finance and Insurance Sector, 2020Q1~2025Q2

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 nine consecutive quarters of growth, indicating that the economy is steadily recovering.

The cyclical trend value of this indicator hit a trough of 98.79 in May 2023. Since then, it has risen for nine consecutive quarters, reaching 101.91 in July 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 and Q2 2025, growth reached 3.3% and 6.1 respectively, signaling that the industry is still steadily recovering.

Figure 10. Annual growth rate and cyclical trend of real GDP Index of Wholesale and Retail, 2020Q1~2025Q2

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” peaked in July 2023, and its business cycle trend has been in decline for 24 consecutive months as of July 2025, indicating that the economic recovery has stalled and is now in a downward trend. The actual values saw negative growth in Q2, Q3, and Q4 of 2024, but showed slight increases in Q1 and Q2 of 2025. The business cycle trend continues to decline, although the pace of the decline has slightly slowed. After standardization, the business cycle fluctuation index dropped to -1.5395 Standard Deviations, indicating that the sector has yet to emerge from a recessionary risk.

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 96.40 by July 2025. While the rate of decline accelerated last year, it has slightly slowed down this year, but the industry has not yet emerged from the risk 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. However, the growth trend has been downwards since then, with Q2, Q3, and Q4 of 2024 showing declines of -0.7%, -3.2%, and -0.7%, respectively, signaling a technical recession. However, in Q1 and Q2 of 2025, the growth rates increased slightly by 0.8% and 0.7%, respectively, indicating that the pace of the downturn has slowed, but the sector is still not out of recessionary danger.

Figure 11. The annual growth rate and circular trend of real GDP in the Accommodation and Catering Industry, 2020Q1~2025Q2

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 reached a peak in April 2024, but has now declined for 15 consecutive months by July 2025. During the same period, the year-on-year growth rate of actual values, which peaked at 6% in Q4 2023, gradually declining each quarter, with the pace of the decline accelerating. In H1 2025, the sector has seen two consecutive quarters of -0.7% negative growth. It is important to note that, after standardization, the business cycle fluctuation index has dropped to -2.1483 Standard Deviations, signaling a worsening situation.

The cyclical trend of this indicator has experienced slight long-term fluctuations. The index peaked in January 2021, then reached a trough in December 2022. Afterward, it accelerated upward, reaching a peak of 100.79 in April 2024. Following this, it reversed direction, and by July 2025, the trend value had decreased to 98.71, with the pace of decline continuing to accelerate. After standardization, the business cycle fluctuation index fell to -2.1483 Standard Deviations, further indicating a deteriorating situation.

In terms of the year-on-year growth rate of actual values, as shown in the bar chart for each quarter, reflecting this trend. In Q1 of 2023, the sector experienced -0.8% negative growth. This was followed by a gradual increase until it peaked at 6.0% in Q4 of 2023. However, after that, the growth rate slowed down and declined, with the sector showing consecutive -0.7% negative growth in the first two quarters of 2025, and the pace of decline has been accelerating.

Figure 12. Annual GDP growth rate and cyclical tendency of Real Estate and Residential Service Industry, 2020Q1~2025Q2

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 31 months, bottoming out in April 2023, and then showing a 27-month recovery from May 2023 to July 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 business cycle trend value peaked in September 2020, reached a trough in April 2023, and has since been rising, reaching 100.19 by July 2025.

Furthermore, looking at the actual year-over-year growth rates, since 2020, every quarter has seen positive growth, but the rates have been relatively modest. The year-over-year growth rate has fluctuated between a maximum of 3.1% (Q2 2020) and a minimum of 0.9% (Q2 2022). The most recent high point was 2.5% (Q2 2024), and in H1 2025, both quarters saw growth rates of 1.8%. The quarterly fluctuations are shown in the chart below.

Figure 13. Real Consumption of Residential Services, Utilities, and Other Fuel Industries, 2020Q1~2025Q2

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 shown an upward business cycle trend since June 2022, peaking in February 2024. After that, it reversed downward, with the business cycle trend value dropping to 99.76 by July 2025. This indicates 17 consecutive months of decline, with no signs of a slowdown. After standardization, the business cycle fluctuation index has dropped to -1.2373 Standard Deviations, which is close to the situation seen in the Accommodation and Catering Industry. This warrants attention!

The cyclical trend of this indicator reached a trough in May 2022. After recovery, the upward trend gradually strengthened, peaking in February 2024. However, it reversed direction and started to decline, with the business cycle trend value falling to 99.76 by July 2025. The standardized business cycle fluctuation value is -1.2373 Standard Deviations, indicating a severe downturn similar to that of the Accommodation and Catering Industry (-1.5395 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. In 2025, the growth rate peaked at 0.6% in February, before slightly declining to 0.5% in July. This reflects concerns about the slow growth of employment due to increased labor shortages during the economic recovery phase.

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