Image Credits: Brookings Institution
Taiwanese firms have expressed declining confidence in their business outlook for the next six months, according to the latest report from the Taiwan Institute of Economic Research (TIER). The sentiment gauge for local manufacturers fell to 96.65 in August, a decrease of 2.3 points from the previous month, marking the third consecutive decline in confidence.
This downturn is attributed to increasing price competition from foreign markets and a sluggish economy in China, which has put pressure on local non-tech manufacturers. The survey revealed a worrying trend, with only 20.6% of firms maintaining a positive outlook, while the percentage of those with negative views rose to 22.7%.
In particular, the steel and iron sectors are bracing for tougher conditions as the central bank has tightened lending terms to cool the housing market. The new regulations require homebuyers with existing property to make down payments of 50% to 70%, a measure aimed at curbing speculative buying. While these restrictions do not apply to first-time buyers or specific urban renewal projects, they are expected to have a cooling effect on the overall property market, further impacting related industries.
Despite the broader negative sentiment, some sectors, particularly electronics, are seeing a slight uptick. Robust demand for artificial intelligence applications and recent product launches by global tech brands, including Apple’s new iPhone series and Apple Watches, have provided a boost to local suppliers within this industry.
Conversely, service providers have also reported a decline in business confidence, with their sentiment dropping 1.14 points to 97.88, reflecting challenges related to the lunar Ghost Month, a period when many avoid major life decisions such as marriages and business deals. This cultural factor, combined with recent fluctuations in the Taiwan Stock Exchange (TAIEX), has contributed to a cautious consumer spending environment.
The construction and real estate sectors have particularly suffered, with confidence plummeting by 4.57 points to 107.36. Loan restrictions have already begun to slow property transactions, and the impact is expected to intensify in the coming months as new credit controls take effect. However, civil engineering firms may be less affected, as government agencies are accelerating public works projects.
Overall, the mixed signals in Taiwan’s economic landscape highlight the challenges facing businesses as they navigate both local and global pressures. As firms adjust to these evolving conditions, maintaining adaptability will be crucial for sustaining growth in the coming months.