Business confidence weakens: TIER

GLIMPSE OF LIGHT: While manufacturers turned cautious because of Mideast tensions, confidence in AI remains, as the US is keen to maintain its edge over China, TIER said

• By Crystal Hsu / Staff reporter

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Taiwan’s business confidence weakened across major sectors last month as Middle East tensions raised costs and uncertainty, although manufacturers remained broadly confident in the artificial intelligence (AI) boom, the Taiwan Institute of Economic Research (TIER, 台經院) said yesterday.

The institute’s manufacturing business-climate gauge slid 0.49 points from July to 100.73, while the services gauge dropped 1.19 points to 97.30, extending its decline to a second month.

In addition, the construction gauge fell 1.89 points to 108.34, ending four consecutive months of gains.

Taiwan Institute of Economic Research Economic Forecasting Center director Gordon Sun poses for a photograph in Taipei on May 25.

Photo courtesy of the Taiwan Institute of Economic Research

Manufacturers became more cautious mainly because of Middle East tensions rather than growing concerns that the AI boom is losing steam, TIER Economic Forecasting Center director Gordon Sun (孫明德) told a news conference in Taipei.

Recent calls by some US AI industry leaders to slow the development of frontier technologies should not be taken as evidence that the boom is ending, Sun said.

The US has strong incentives to keep AI investment moving because data center construction can attract foreign investment and create jobs, while Washington is also seeking to maintain its lead over China in AI, he said.

TIER president Chang Chien-yi (張建一) said at the news conference that global technology companies are likely to keep pushing ahead with AI development, with the industry’s expansion unlikely to reverse.

“It is a matter of timing and pace,” he said.

Still, any significant slowdown in AI demand would have a major impact on Taiwan, where related technology has become the economy’s most important growth engine, Sun said.

While the institute’s survey found services sentiment also weakened last month, retailers remained relatively optimistic about the months ahead, with nearly 60 percent upbeat about their business outlook, it said.

Strong economic growth, robust earnings at major listed companies and gains in Taiwanese equities are also expected to support household spending, while cultural events and other activities could also draw consumers, the institute said.

The construction gauge fell after four straight months of gains, but the decline does not necessarily point to renewed weakness, TIER Taiwan Industry Economics Database director Arisa Liu (劉佩真) said.

The central bank’s decision this month to ease financing restrictions on second-home purchases and land loans should help improve sentiment, Liu said.

Housing transactions could rise modestly next quarter while prices remain broadly stable, with owner-occupiers likely to remain the main source of demand, she said.