Taipei: Business sentiment in Taiwan's manufacturing, service, and construction sectors improved in May, driven by strong artificial intelligence demand, the Taiwan Institute of Economic Research (TIER) said Thursday.
According to Focus Taiwan, at a news conference in Taipei, TIER discussed the manufacturing composite index, which rose 2.66 points from a month earlier to 99.58 in May, marking its second consecutive monthly increase and the highest level since June 2024. Based on its monthly survey of local businesses, the service sector index climbed 3.89 points to 100.62, its third straight monthly gain and the highest reading since April 2021. Meanwhile, the construction index rose 9.64 points to 103.99, extending its upward trend for a second month.
The Taipei-based think tank attributed the manufacturing improvement to continued AI-driven demand, which kept Taiwan's semiconductor supply chain and electronics and machinery industries on a growth trajectory. Exports surged 51.7 percent year-on-year in May, accelerating from 39 percent growth in April, on robust demand for high-end servers, semiconductors, and other AI-related products. Imports also jumped 54.9 percent, supported by AI-related demand and higher prices for crude oil and basic metals.
Looking ahead, manufacturers remained cautiously optimistic, with firms expecting AI applications and advanced semiconductor demand to continue supporting the electronics and machinery sector. Chemical manufacturers, however, remained under pressure from weak end-market demand and intensifying competition despite easing geopolitical tensions in the Middle East, TIER said.
The service sector was supported by AI-related enthusiasm, lifting stock prices, trading activity, and corporate lending, while restaurants and hotels benefited from stronger travel and dining demand during the Labor Day holiday and Mother's Day. Construction activity also improved as technology plant projects and public infrastructure works gathered pace, though builders continued to face rising costs and construction waste disposal issues.
TIER said infrastructure investment and AI-related factory construction are expected to continue supporting the construction sector over the next six months. The think tank added that Taiwan's property market is likely to remain characterized by lower transaction volumes and stable prices as credit controls stay in place and buyers remain cautious.