Commerce Development Research Institute released the Business Cycle Coincident Composite Index for Taiwan Service Sector today (5th June), Which will continue to fluctuate slightly in the long-term trend (100) till October. This is the 17th month after the actual value hit the top in May last year. The forecast continued to decline until April of this year, in April, the cycle index fell to 99.91. In May and June, it rose slightly to 99.92 and 99.93. In July and August, it dropped slightly to 99.90 and 9.87 and then in September and October are 99.88 and 99.90. Although there is no continuous significant downward risk, there is no visible sign of a rising. This also means that the measures being implemented by the government are effective, yet they need to be accelerated. As the world economy has entered the take-off period of the digital economy, the economic and trade competition of the IoT was newly launched. The opportunities and challenges of Taiwan are no longer just the short-term economic countermeasures to create sufficient demand, but the development of the digital economic innovation ecosystem of industrial structure improvement and upgrading.

The recent trend of Coincident indicator cycle index

A. Cyclical Leading Composite Index for Service Industries（Long-term trend excluded）
The actual value peaked in March 2018 (cycle index was 99.19) and then fell. Its cycle index has dropped from 99.17 in April to 98.17 in August, and slightly rose to 98.26 and 98.28 in September and October, but then fell to 98.09 and 97.9 in November and December and rose to 97.93, 98.15 and 98.29 Q1 this year respectively. A slight decrease to 98.03 in April shows that the leading indicators are at a low level, unlikely to rebound. However, the private fixed capital formation has gradually accelerated in recent months, and the long-term deficit in service trade has improved. The fallen of commercial service stock price cycle index also ended last October, continued to rise in March and April this year.

B.  The sub-indicators of the coincident index has various trends in different sectors, the composite index has continued to decline in June 2018, and the rate of decline has gradually accelerated in Q4, and slightly accelerated in Q1 this year. Although the actual value is not as predicted from January this year, its cycle index will be lower than the long-term trend (100), but it is predicted to fall below 100 from April.
The cycle index forecasted was 99.91 in April, 99.92 and 99.93 in May and June, and slightly decreased to 99.90 and 99.87 in July and August, then slightly increased to 99.88 and 99.90 in September and October. The cycle index stays below the long-term trend, showing a sign of weakness. There is no sign of a slowdown, yet no sign of prosperity. Both the promotion of short-term sufficient demand and the long-term reform of digital transformation structure are undoubtedly necessary, the era of economic reform of smart commerce is coming and should be welcome with optimism.

Business Cycle Composite Index for Taiwan Service Sector

Source： Business Cycle Forecasting Team, CDRI

Previous cycle:

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