Taiwan’s service sector continues to show slight overheating

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Taipei residents go shopping in a recently opened Carrefour Market in this undated file photo. According to the Commerce Development Research Institute, Taiwan's service sector continued to flash a yellow-red light in September, indicating slight overheating, amid increasing demand for high-tech gadgets. (NOWnews/courtesy of Carrefour)

TAIPEI (CNA) – Taiwan’s service sector continued to flash a yellow-red light in September, indicating slight overheating, amid increasing demand for high-tech gadgets, according to the Commerce Development Research Institute (CDRI).

The CDRI, one of the country’s leading economic think tanks, said the Index of Service Industry (ISI) for September stood at 105, unchanged from August, flashing a yellow-red light that signaled a score of 104 to 108.

The slight overheating was driven by solid demand for tech devices and a move by buyers to build their inventories ahead of the year-end shopping season, the CDRI said.

The latest ISI reflected Taiwan’s trade figures for September, which showed a 28.1 percent year-on-year growth of exports and a 5.4 percent increase in production in the manufacturing sector from the same month last year, the CDRI said.

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

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

In September, the sub-index for securities trading fell to 101 from 103 a month earlier as service sector related share prices dropped amid lower turnover, the think tank said.

As for the labor market and wages, the sub-index rose to 106 in September from 105 in August as the average regular monthly wages in the service sector increased from NT$29,388 to NT$29,468 (US$976) over the one-month period, the think tank said.

In addition, the number of working hours increased from 169.3 August to 181.4 in September, which helped boost the sub-index, according to the CDRI.

Meanwhile, the sub-index for business operations dropped from 104 in August to 102 in September, as only the information and technology services industry saw an increase in sales, the report showed.

Other factors in the sub-index, such as the number of flights handled by airports in Taiwan and sales in the retail, wholesale and food/beverage businesses, also fell.

The CDRI has forecast that the October index for the local service sector will flash another yellow-red light, with the ISI at 105, on the back of promotional campaigns by some department stores to celebrate their anniversaries and the long holiday mid-Autumn in October, which boosted sales in the food/beverage sector.

By Liao Yu-yang and Frances Huang