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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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May 19 2014

The Cyclical Nature of Taiwan’s Investment Growth

In the final quarter of 2013, Taiwanese GDP growth was driven in large part by a jump in the growth rate of gross capital formation – a measure of investment growth – which surged to its highest reading in more than three years. Unfortunately, given that Taiwan is extremely export oriented, investment growth experiences similar cyclical behavior to export growth, making it quite volatile and important to monitor in the context of cyclical risks.

In fact, according to the advance estimate of first quarter GDP, year-over-year investment growth snapped back in early 2014. To avoid being taken by surprise, it is important to monitor the growth rate of ECRI’s Taiwanese Long Leading Index (TWLLI), which tends to lead cyclical turning points in investment growth.

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