Economic monitoring indicators stay red for 7th straight month

Taipei, July 27 (CNA) Taiwan's main business monitoring indicator remained at a "red" level in June for the seventh consecutive month, the second-longest streak on record, as robust artificial intelligence (AI)-driven demand continued to fuel exports and investment.

The composite monitoring indicator rose two points from May to 41 in June, while both the leading and coincident indicators continued to trend upward, indicating the domestic economy was still growing steadily, the National Development Council (NDC) said Monday.

Under the NDC's five-color system, red signals a booming economy or even overheating, while green indicates stable conditions and blue signals weakness. Yellow-red and yellow-blue represent transitions between the green and red or green and blue lights.

The current streak trails only the record nine consecutive red signals logged from February to October 2021.

Among the indicator's nine components, the manufacturing sales index improved from a yellow-red to a red signal, while overtime hours in the industrial and service sectors rose from green to yellow-red, with each contributing one point to the overall score.

The remaining seven components -- money supply, stock prices, industrial production, exports, machinery and electrical equipment imports, retail/wholesale/food and beverage sales, and manufacturer sentiment -- were unchanged.

Chen Mei-chu (陳美菊), head of the NDC's Department of Economic Development, said strong AI demand and expanding AI applications have boosted demand for chips and servers, supporting exports and investment.

AI-related gains have also begun spilling over into non-tech sectors such as machinery and basic metals, she said.

Chen said the export orders index pointed to brighter business confidence, while the real value of semiconductor equipment imports rose month-on-month for a fourth straight month, reflecting continued investment by Taiwanese chipmakers.

Looking ahead, the NDC said exports are expected to remain strong, supported by continued AI infrastructure expansion, broader AI adoption and the peak season for consumer electronics shipments in the second half of the year.

Investment is also expected to benefit from higher capital spending by major semiconductor firms, increased investment by international companies, and government support for the digital and net-zero transitions of small and medium-sized enterprises, the NDC said.

Private consumption is likely to remain resilient, backed by a stable labor market, wealth effects from a strong stock market and spending tied to major exhibitions and sporting events, the council said.

Asked whether the red-light streak could continue through year-end, Chen said she was "cautiously optimistic" despite the challenge of a high comparison base in the second half.

She said think tanks generally expect growth above 8 percent in the second half of 2026, slower than the first half's double-digit pace but still robust.

Chen also downplayed concerns over Google parent Alphabet's negative free cash flow, saying the focus should remain on whether AI applications continue to expand and corporate earnings stay strong.

She cited Taiwan Semiconductor Manufacturing Co.'s decision to raise capital expenditure guidance as evidence that demand remains solid.

The NDC nevertheless warned that uncertainties persisted, including the conflict in the Middle East and evolving U.S. tariff policies.

Chen said recent U.S. tariff developments have been relatively favorable for Taiwan's manufacturers in non-tech sectors, while the Middle East conflict is likely to have only a limited long-term impact because the global energy mix is now more diversified than during past oil crises.