Taiwan service sector sentiment hits 5-year high, domestic demand bolsters economy

Taiwan's economic outlook brightened in May, with the service sector's business climate survey reaching its highest point since April 2021. The Taiwan Institute of Economic Research (TIER) reported that the service sector index climbed to 100.62 points, a significant increase driven by a booming stock market.

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The stock market's prosperity has a very obvious impact on consumer spending power. For Taiwan's economy, this is certainly good news. Taiwan's economic growth momentum is not only supported by exports and investment; domestic demand has also joined the ranks.

This surge in stock market activity has created a "wealth effect," bolstering consumer spending and indicating that Taiwan's economic momentum is now supported by domestic demand, not just exports and investment. The manufacturing sector also showed resilience, rising for the second consecutive month to 99.58 points, while the construction sector saw a substantial jump to 103.99 points.

TIER economist Sun Ming-te highlighted that while manufacturing's rise is more of a recovery after a decline, the service sector's upward trend is particularly strong. He attributed this growth to increased borrowing for investments in AI technology and stock purchases, benefiting financial institutions like banks, insurance companies, and securities firms.

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The upward trend in the service sector is the most obvious. The service sector has been surging upwards since the middle of last year, mainly because the stock market is good, benefiting securities firms, and banks have also increased a large number of lending cases.

Despite earlier concerns about geopolitical tensions and trade uncertainties, the economic clouds appear to be dissipating. The ongoing AI boom continues to drive physical and financial investments, fostering optimism among businesses. The construction sector, though facing challenges with waste disposal and rising costs, is benefiting from accelerated factory construction for tech firms and the progress of major public projects.

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The construction sector's outlook for the current month and the next six months is becoming more optimistic. Although it still faces problems with the disposal of construction waste and rising construction costs, the positive factor is that the AI wave is driving the acceleration of technology factory projects.