Taiwan’s business sentiment improved across manufacturing, services and construction last month, as resilient artificial intelligence (AI) demand helped cushion the economy from geopolitical uncertainty in the Middle East, the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) said yesterday.
The institute’s manufacturing business climate gauge rose 0.93 points from a month earlier to 97.14, while the services index increased 0.54 points to 96.73. The construction sector gauge rose 2.6 points to 94.67, ending three consecutive months of decline.
“The worst moment has already passed,” TIER Economic Forecasting Center director Gordon Sun (孫明德) said at a news conference in Taipei, adding that the economic impact of Middle East tensions was slowly fading.
Photo courtesy of the Taiwan Institute of Economic Research
Taiwan’s economy is being supported by four main drivers, led by strong AI-related demand that continues to bolster the information and communications technology sector, Sun said.
Higher raw material prices triggered by Middle East tensions have encouraged inventory replenishment and advance orders, supporting business activity, he said.
The AI boom is driving demand for factories, office space and industrial equipment, helping sustain export orders and shipments in Taiwan’s trade-dependent economy.
Sun referred to comments by Advanced Micro Devices Inc chief executive officer Lisa Su (蘇姿丰), who compared the AI boom to a baseball game still in the “third inning,” as an indication that the industry’s long-term growth cycle remained intact.
Domestic consumption has remained firm, supported by elevated equity markets, AI-linked wage growth and bonus payouts, he said.
Although geopolitical risks remain, markets have largely adjusted for the shock and are focusing more on possible US-Iran peace negotiations, he said.
Taiwan’s economic growth forecast could be revised upward if AI demand continues to accelerate, with investors closely watching whether the supply chain remains “very busy” in the second half of this year, Sun said.
However, the property market remains subdued.
TIER Taiwan Industry Economics Database director Arisa Liu (劉佩真) said the gap between strong equities and weak housing reflects the central bank’s tight credit controls, which have limited capital flowing into real estate.
Investors have shifted toward stocks due to higher returns and liquidity, while expectations of a neutral-to-tight monetary stance are weighing on housing sentiment, Liu said.
Although transactions are likely to remain weak in the near term, high land acquisition and construction waste disposal costs are helping support property prices, leaving buyers and sellers in a standoff, she said.
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