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Activity within local service sector remains stable in May: think tank

TAIPEI--Activity in Taiwan's service sector in May remained stable due to an economic recovery at home and abroad, according to a report released by the local think tank Commerce Development Research Institute (CDRI).

The CDRI said that the index of service industry (ISI), a gauge of the conditions in the local service sector, stood at 100 points. Although the May index fell from April's revised 101, the data still flashed a “green” light, indicating that the local service sector remained stable.

May was the third consecutive month for the ISI to flash a green light to show stable growth in the local service sector, the institute said. In March, the ISI was 100 points.

The CDRI uses a five-colored signal system in conjunction with the ISI, which focuses on three major segments — securities trading, the labor market and wages, and business operations — to describe the climate of the local service sector

Red signals overheating, yellow-red shows slight overheating, green represents steady growth, yellow-blue signals sluggishness and blue indicates recession.

The institute said a recovery in the global economy has given a boost to Taiwan's domestic demand and led to growth in local commercial revenue so that the May ISI continued to flash a green light.

According to the Ministry of Economic Affairs, the May local commercial revenue, which is composed of sales generated by the retail, wholesale and restaurant businesses, totaled NT$1.22 trillion (US$40.8 billion), up 3.9 percent from a year earlier and also up 2.2 percent from a month earlier.

In the securities trading segment, the sub-index in May fell one point from April to 99, although the local bourse still steamed ahead. The CDRI said the slight decline in the sub-index reflected a drop in foreign fund inflows into the local equity market and a relatively high comparison base recorded over the same period of last year.

In May, the weighted index on the Taiwan Stock Exchange rose 284.47 points or 3.24 percent from a month earlier.

The CDRI said the sub-index in the labor market and wage segment stayed unchanged at 100 points in May as labor demand in the local market was solid, which stabilized regular monthly wages.

As for the business operations segment, the sub-index stood at 101 points in May, unchanged from a month earlier, since the retail and restaurant businesses benefited from rising buying at a time when consumers celebrated Mother's Day, said the CDRI.

Looking ahead, the CDRI said as consumer confidence has been improving with department stores gearing up to launch promotion campaigns and the local tourism industry booming during the summer vacation, the ISI is expected to continue to show stable service activity in Taiwan in June.

The institute said the retail and restaurant businesses could continue to ride the waves of an uptrend, adding that the June ISI will likely stay unchanged at 100 points.

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