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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Jul 03 2013

Chinese Slowdown Weighs on Taiwan

ECRI has just updated its Taiwanese Long Leading Index (TWLLI). The value of this index lies in its ability to anticipate cyclical turns in the economy before conventional leading indexes.

Despite low inflation and sluggish growth, the Taiwanese central bank maintained its current monetary policy last week. This comes on the heels of the government cutting its 2013 GDP forecast and its economic monitoring indicator signaling a slowdown for the ninth consecutive month. The recent slowdown in China flashes another warning sign for the export-driven economy, as China is Taiwan’s largest trade partner.

ECRI’s latest update to the TWLLI, which correctly anticipated the current economic weakness, provides insight into whether the Taiwanese central bank can afford to maintain its policy and muddle through, or if the economy is likely to worsen.