Taiwan business monitoring indicator records 10th consecutive 'red' light

Taipei, Oct. 29 (CNA) Taiwan's business monitoring indicator remained in the "red" light category in September for a record 10th consecutive month, supported by strong demand for artificial intelligence (AI) applications, the National Development Council (NDC) said Thursday in a press release.

The composite score for business monitoring indicators rose from a revised 40 points in August to 41 points in September, remaining in the highest red light category.

The council said the 10-month streak is the longest consecutive run of red lights since the indicator system was introduced in 1977, surpassing the previous record of nine consecutive red lights from February to October 2021.

Under the NDC's five-color system, a red light indicates a booming economy or possible overheating.

Among the nine components of the monitoring system, the indicator for overtime hours in the industrial and service sectors improved from "green" to "yellow-red," adding one point to the composite score, while the remaining eight indicators were unchanged.

Share prices, industrial production, merchandise exports, imports of machinery and electrical equipment, manufacturing sales, as well as retail, wholesale and food and beverage sales all remained in the red light category. Money supply stayed green, while manufacturers' business sentiment remained yellow-red.

NDC Department of Economic Development Director Chen Mei-chu (陳美菊) said the latest record differed from the previous nine-month streak in 2021, which was partly supported by a low comparison base following the COVID-19 pandemic.

In contrast, the current expansion has been driven primarily by the strength of Taiwan's semiconductor industry despite a relatively high comparison base, she said.

The AI boom has also spread to traditional industries and related supply chains, including copper foil, substrates, specialty chemicals, machinery and equipment, Chen added.

With exports and export orders remaining at high levels and domestic consumption expected to receive a seasonal boost from year-end shopping campaigns, the red light could persist until the end of the year, she said.

However, Chen cautioned that a higher comparison base in the first quarter of 2027 could moderate growth and affect the business monitoring indicator.

Responding to concerns about whether major cloud service providers (CSPs) can sustain their substantial AI-related capital spending, Chen said recent stock market volatility reflected investor concerns rather than weakening AI demand.

She cited a TrendForce forecast that combined capital expenditures by the world's nine largest CSPs are forecast to exceed US$1.5 trillion in 2027, saying AI investment momentum remains strong and should continue to support demand for chips and other hardware made in Taiwan.

The trend-adjusted leading index, which gauges economic conditions over the next six months, rose 0.56 percent month-on-month to 104.69 in September, while the coincident index edged up 0.01 percent to 105.21, indicating the economy remains on a growth trajectory, according to the NDC press release.

(By Pan Tzu-yu and Evelyn Kao)

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Source: Focus Taiwan