Taipei, July 8 (CNA) The local service sector flashed another "red-yellow" light pointing to slight overheating, in May, with an improving global economy boosting Taiwan's production and consumption, according to the Commerce Development Research Institute (CDRI).
The CDRI, one of the leading economic think tanks in Taiwan, said that the Index of Service Industry (ISI) for May stood at 105, up 1 point from a month earlier and continued to flash red-yellow for the month.
It was the third consecutive month the ISI has flashed red-yellow after "green" in February.
The CDRI uses a five-color coded system, in conjunction with the ISI, to describe the outlook for Taiwan's service sector, focusing on three major segments -- securities trading, business operations, labor market and wages.
Red indicates overheating, red-yellow slight overheating, green represents steady growth, blue-yellow sluggishness and blue indicates recession.
The CDRI said that on the back of a recovery in the global economy that has boosted demand for high-tech gadgets, Taiwan's exports in May grew 8.4 percent from a year earlier to US$25.52 billion, marking the eighth consecutive month of growth for the country's outbound sales.
Strong exports paved the path for an increase in output with the May production index for the manufacturing sector, which accounts for more than 90 percent of the country's total industrial output, rising 2.02 percent from a month earlier to 111.8, while the sector's purchasing managers index (PMI) for May stood at 58.7, pointing to expansion, the CDRI said.
In addition, sales generated by the local wholesale sector in May also increased by 3.5 percent from a year earlier due to strong exports, reaching NT$NT$805.18 billion (US$26.31 billion), while retail sales grew at a slower pace of 1 percent year-on-year in the month to NT$338.48 billion, the CDRI added.
In May, the sub-index for securities trading rose 1 point from a month earlier to 101, a reflection of higher share prices and expanded turnover, the think tank said.
The weighted index on the Taiwan Stock Exchange passed the 10,000 point mark in mid-May for the first time in 17 years on aggressive foreign institutional buying and continued to move even higher in the following month.
As for the labor market, the sub-index also rose one point from a month earlier to 105 in May as hiring and the number of working hours in the service sector rose, the CDRI said.
The CDRI said that the sub-index for business operations in May gained one point from a month earlier to reach 101 as sales in the leasing and technology service industries rose. In addition, the volume of land transportation cargo and power consumption also grew to support the sub-index, the CDRI added.
The think tank said the ISI for June could fall to 104 from 105 in May, but is still expected to flash 'red-yellow' as the month was a slow season for the local tourism industry, while a weaker Taiwan dollar could boost outbound sales of the local wholesale sector in the month.
