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CEPD says economy flashes blue light for 10th straight month

Taiwan's economy has for the 10th month in a row flashed the blue signal representing sluggishness, in the midst of a slowdown across various industries, reported the Council for Economic Planning and Development (CEPD) yesterday.

The agency issued an economic soundness score of 15 for August, a decline of 1 point from July. The 15 score was represented by a blue signal in the CEPD's system of using five colors, namely red, yellow-red, green, yellow-blue and blue, to denote an economy that is, respectively: overheating, robust, stable, slowing and sluggish.

This was the 10th month in a row Taiwan has received the blue signal, the second-worst performance since the system was put in place.

Back in 2000, Taiwan flashed the blue signal for 15 months in a row, due to the bursting of the Internet bubble. In 1995 and 2008, Taiwan gave the blue signal for nine months in a row.

However, Hung Jui-pin, a CEPD researcher, said things aren't as bad as they look.

"During the 2008 losing streak, the average monthly score was 10.7. This time around, the average score is 14.7," he said.

Of the various categories that make up the composite index, the M1b monetary supply, total lending and investment by banks, stocks and industrial output stayed in the yellow-blue signal range. Exports, wholesale/retail and manufacturing stayed in the blue signal range.

Yet employment in the non-agricultural sector was knocked down one notch from green to yellow-blue, bringing the whole composite index down.

Experts predicted that August may be the last month a blue signal is issued. Given an export increase in the first half of September, the signal for this month may turn yellow-blue.

Such a view was shared by Hung, who said during the CEPD's news conference yesterday that various positive factors, including moves by the European Central Bank to buy bonds and quantitative easing measures by the U.S., may translate into more orders for Taiwan manufacturers, whose exports will then increase.

Yet domestic demand remains a concern, Hung said, as enterprises' lack of willingness to invest is expected to keep wages at a low level. People will then be less willing to spend, causing consumption to drop.

A country's gross domestic product is the sum of its consumption, private investment, government spending and exports minus imports.

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