Taiwan Service Sector Signals Sluggish Growth

Taiwan’s service sector flashed another “yellow-blue” light in August, signaling sluggish growth, but it moved a step closer to pulling out of a long slump, according to a survey by the Commerce Development Research Institute.

The CDRI said the index of service industry stood at 99 points in August, which was at the high end of the “yellow-blue” range from 93 to 99, and was up two points from a month earlier, CNA reported.

The CDRI uses a five-color coded system in conjunction with the ISI to describe the climate of Taiwan’s service sector, focusing on three major segments—securities trading, business operations, and the labor market and wages.

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

The CDRI said the improvement in August largely reflected the higher revenue posted by Taiwan’s wholesale trade, which returned to positive growth of 3.39% from a year earlier after posting a year-on-year fall of 1.53% in July.

The rise in wholesale revenue in August reflected a 1.01% year-on-year rise in the country’s exports during the month, the CDRI said.

In addition, rising demand ahead of the Mid-Autumn Festival, which fell on Sept. 15, boosted Taiwan’s retail trade in August and helped offset the impact of a decline of Chinese visitors to Taiwan, the CDRI said.

As a result, the sub-index for business operations for August rose 2 points to 96, reflecting an increase in consumption during the month.

As for the labor market, the sub-index for August also gained 1 point from a month earlier to 99 as employers asked employees to work more overtime to meet rising demand during the peak season in the sector.

But average regular wages in the service sector remained little changed from a month earlier, the CDRI said.

The sub-index for securities trading rose 1 point month-on-month to 99 in August as share prices of service companies moved up on higher turnover, improving market sentiment, the CDRI said.

Looking ahead, the CDRI said the ISI could rise to 100 in September and flash a “green light” for the first time in 19 months.

It expected Taiwan to benefit from an increase in exports during the month, especially among suppliers providing components or services for Apple’s latest iPhones—the 4.7-inch iPhone 7 and the 5.5-inch iPhone 7 Plus.