Taipei: Taiwan's main business monitoring indicator remained at a "red" level in June for the seventh consecutive month, marking the second-longest streak on record. This trend has been fueled by robust demand driven by artificial intelligence (AI), which continues to bolster exports and investment.
According to Focus Taiwan, the composite monitoring indicator increased by two points from May, reaching 41 in June. Both the leading and coincident indicators are on an upward trend, suggesting steady domestic economic growth, as reported by the National Development Council (NDC). The NDC's five-color system indicates that red signals a booming economy or potential overheating, green signifies stable conditions, and blue denotes weakness. The current streak of red signals trails only the record nine consecutive months from February to October 2021.
Among the nine components of the indicator, the manufacturing sales index improved from yellow-red to red, while overtime hours in the industrial and service sectors shifted from green to yellow-red, each contributing one point to the overall score. The other components, which include money supply, stock prices, industrial production, and more, remained unchanged.
Chen Mei-chu, head of the NDC's Department of Economic Development, highlighted that strong AI demand and expanding AI applications have significantly increased demand for chips and servers, thus supporting exports and investment. The positive impact of AI is also beginning to extend to non-tech sectors like machinery and basic metals.
Chen noted that the export orders index indicates growing business confidence, while the real value of semiconductor equipment imports has risen for four consecutive months, reflecting ongoing investment by Taiwanese chipmakers. The NDC expects continued strong exports, driven by AI infrastructure expansion, broader AI adoption, and the peak season for consumer electronics shipments later in the year.
Investment is predicted to benefit from increased capital spending by major semiconductor firms, heightened investment by international companies, and government support for digital and net-zero transitions among small and medium-sized enterprises. The NDC also expects private consumption to remain resilient due to a stable labor market and a strong stock market.
When questioned about the possibility of the red-light streak continuing through the end of the year, Chen expressed cautious optimism, despite a challenging high comparison base in the latter half of the year. She mentioned that growth above 8 percent is generally expected by think tanks in the second half of 2026, albeit slower than the first half's double-digit pace.
Chen addressed concerns over Google parent Alphabet's negative free cash flow, emphasizing that the focus should remain on the expansion of AI applications and strong corporate earnings. She cited Taiwan Semiconductor Manufacturing Co.'s decision to raise capital expenditure guidance as evidence of solid demand.
Despite these positive indicators, the NDC warned of ongoing uncertainties, including the Middle East conflict and evolving U.S. tariff policies. Chen mentioned that recent U.S. tariff developments have been favorable for Taiwan's manufacturers, particularly in non-tech sectors, and that the Middle East conflict is likely to have a limited long-term impact due to a more diversified global energy mix compared to past oil crises.