Taiwan's economy in strong momentum for 6th straight month in May

Taipei, June 26 (CNA) Taiwan's economy continued to enjoy robust momentum as a major index flashed a "red light" for the sixth consecutive month in May on strong global demand for AI applications, the National Development Council (NDC) said Friday.

Data compiled by the NDC showed the composite index of economic indicators hit 39 points and stayed in the "red light" range, but the index fell one point from the revised score of 40 in April.

The NDC uses a five-color system to track the economy. A red light (38-45) signals overheating; yellow-red (32-37) indicates a warming economy; green (23-31) suggests stable growth; yellow-blue (17-22) reflects sluggishness; and blue (9-16) points to contraction.

The NDC, the top economic planning agency in the country, said the fall in the May score came after the subindex for overtime working hours in the industrial and service sectors and manufacturing sector revenue fell one point each, while the money supply subindex rose by one point.

The subindexes for six other factors -- stock prices, industrial production, merchandise exports, imports of machinery and electric equipment, sales posted by the retail, wholesale and food/beverage sector and business sentiment among manufacturers stayed unchanged in May, the data indicated.

Chen Mei-chu (陳美菊), head of the NDC's Department of Economic Development, said the local tech sector continued to benefit from increased capital expenditure by the major cloud service providers in the world and an expansion in AI applications, adding that semiconductor suppliers and other AI-related firms continued to invest to add momentum.

The falls in the two subindexes largely reflected a relatively high comparison base a year earlier, when foreign buyers rushed to build up inventories to reduce the impact when U.S. tariffs came into effect, Chen said.

In May, the leading indicators index continued to move higher by 0.55 percent from a month earlier to 103.81 amid growing optimism toward business outlook, the NDC said.

Among the seven factors of the leading indicators, the subindexes of five -- export orders, money supply, stock prices, imports of semiconductor equipment and business sentiment among manufacturers -- moved higher, while those for employment and the total floor area of new construction projects fell.

A relatively high comparison base in the second half of last year could affect the composite indicators in the second half of this year, indicating the index could flash a yellow-red light, while economic growth stays on track, Chen added.

However, according to the NDC, the local economy still faces uncertainties such as how talks between the United States and Iran progress, how the major economies adjust their monetary policies, and how U.S. tariff policy evolves.

The Directorate General of Budget, Accounting and Statistics has raised its forecast for Taiwan's GDP growth from 7.71 percent to 9.64 percent for this year.