Economy stays on solid footing, NDC says

EIGHTH MONTH OF ‘RED’: Some momentum from the AI boom fed into orders for machinery and products, but those not exposed to the industry faced difficulties

• By Crystal Hsu / Staff reporter

• • Add TT as Preferred Source

  • 

  • 

  • 

Taiwan’s economy remained on a solid footing last month, buoyed by the artificial intelligence (AI)-driven boom, although consumer confidence was shaken this month as stock market volatility and external uncertainty tempered sentiment, National Development Council (NDC) data released yesterday showed.

The government’s business monitoring indicator remained “red” last month for an eighth consecutive month, the second-longest streak on record, with the composite score unchanged at 41, the council said.

The council uses a five-color system to track the economy, with “red” (38 to 45 points) signaling overheating, yellow-red (32 to 37) indicating a warming economy, green (23 to 31) suggesting stable growth, yellow-blue (17 to 22) reflecting sluggishness and blue (9 to 16) pointing to contraction.

People gather at a mango shaved ice shop on Yongkang Street in Taipei on Aug. 10.

Photo: Tien Yu-hua, Taipei Times

The AI boom remained the main engine of growth, with demand for AI-related hardware supporting exports and investment, the council said.

Some of that momentum also fed into orders for machinery and products, including basic metals, chemicals and plastics, NDC Department of Economic Development Director Chen Mei-chu (陳美菊) said.

Still, industries less exposed to AI continued to face excess capacity and intense price competition from China, Chen said.

Manufacturing sentiment picked up last month as companies became more optimistic about current and future business conditions, she said.

Robust export orders and expectations for economic growth of more than 8 percent in the second half of this year should continue to support activity, she said.

Domestic consumption is also holding up, supported by rising wages, stable employment, strong corporate profits and a recovery in auto sales, Chen said.

Real consumption expanded after adjusting for inflation, she said.

Tensions in the Middle East and US tariff policies remain risks to the outlook, Chen said.

However, continued strength in AI demand should provide an important support for Taiwan’s economy, helping sustain growth even as consumer confidence remains comparatively subdued, she said.

National Central University’s Research Center for Taiwan Economic Development said its consumer confidence index this month rose 0.43 points from last month to 65.01.

Expectations for employment opportunities over the next six months posted the biggest gain among the six components, rising 1.13 points to 73.32, the center said.

Sentiment over price levels, household finances and the domestic economy also improved, albeit marginally, it said.

The gains were offset by greater caution toward financial markets and durable goods purchases, it said.

Sentiment over stock investments fell 0.36 point to 27.72, while willingness to buy durable goods declined 0.29 points to 93.14, it said.

Dachrahn Wu (吳大任), executive director of the center, said the relatively small changes across the components showed that consumer confidence was essentially unchanged from the previous month.

The survey, conducted before heavy rain damaged crops in southern Taiwan and before the latest sharp swings in the stock market, might not have fully reflected risks facing consumers, Wu said.

Damage to vegetable and fruit production could push up food prices and inflation expectations next month, while renewed stock-market volatility could further weigh on confidence, he said.