Taipei:Business sentiment within Taiwan's manufacturing sector has reached its highest level in approximately 54 months, driven by a global surge in artificial intelligence (AI) investments. This development was reported by the Taiwan Institute of Economic Research (TIER), which also cautioned about potential risks looming on the horizon.
According to Focus Taiwan, the composite index measuring business sentiment among local manufacturers increased by 0.50 points from August to 101.39 in September, marking its highest point since February 2022. This data was compiled by TIER, a leading economic think tank in Taiwan. Conversely, the service sector's index declined by 3.15 points to 92.65, while the construction industry's index rebounded, rising by 2.81 points to 110.42.
TIER highlighted that Taiwanese manufacturers are benefiting from significant global investments in AI infrastructure and inventory accumulation by international brands ahead of new product launches, such as the iPhone 18 series and iPhone Duo. Additionally, rising international crude oil prices have increased petrochemical product prices, and the completion of annual maintenance by some non-tech industries has bolstered production.
In TIER's September survey, 26.8% of manufacturing respondents noted improved business conditions, up from 19.5% in August. Conversely, 20.3% reported worsened conditions, down from 25.6% the previous month. However, expectations for the next six months have dimmed, with only 24.0% anticipating improvements, down 3.1 percentage points from August, and 19.8% expecting deterioration, up 1.8 percentage points.
Gordon Sun, Director of TIER's Economic Forecasting Center, warned that despite the AI boom and the peak season for consumer electronics, Taiwan's economy faces risks. These include the possibility of the U.S. Federal Reserve adopting a more hawkish stance to curb inflation, which could strengthen the U.S. dollar against the Taiwan dollar, potentially leading foreign investors to withdraw funds from Taiwan and causing financial market volatility.
Military conflicts in the Middle East could further elevate crude oil prices, prompting upstream petrochemical suppliers to increase prices, potentially weakening demand from downstream buyers. Sun also expressed concerns about a possible slowdown in AI development, which has recently affected global stock markets.
In the service sector, financial market volatility has led to increased caution among businesses, although the food and beverage industry continues to thrive due to growing demand. In the construction sector, the central bank's mid-September easing of selective credit controls has supported the property market, yet the industry still grapples with a substantial inventory of unsold homes, according to TIER.
