Taiwan’s economic momentum shows no signs of cooling. The National Development Council (NDC) announced that the composite score for June’s economic monitoring indicators was 41 points, an increase of 2 points from the previous month. The signal remained at “red,” representing a booming economy. This not only marks the seventh consecutive month of a red light but also the second-longest streak in history, just two months away from the record nine-month streak set in 2021.
Chen Mei-chu, Director of the NDC’s Department of Economic Development, stated that the current economic expansion is robust. Against the backdrop of strong AI demand and accelerating applications, the latest forecasts from major domestic think tanks indicate that despite challenges from a higher base period in the second half of the year, the combined economic growth rate is still expected to reach over 8%. The overall outlook is cautiously optimistic.
How Was the 41-Point Score Derived? Understanding the Scoring Rules
The economic monitoring signal is not a single statistic but a composite score derived from nine individual components. Each indicator, after seasonal adjustment and calculation of its annual rate of change (except for the stock price index), is compared against four check values set by the NDC. Based on its position, it receives a score from 1 to 5—from low to high: Blue Light (1 point), Yellow-Blue Light (2 points), Green Light (3 points), Yellow-Red Light (4 points), and Red Light (5 points). The sum of these nine scores inevitably falls between 9 and 45 points, which is then mapped to a score range to determine the overall signal.
Two Key Indicators Improve, Boosting June’s Score
Observing the nine components of the economic indicator, two showed improvement in June. The “Manufacturing Sales Volume Index” shifted from a Yellow-Red Light to a Red Light, with its rate of change significantly expanding from 8.4% the previous month to 14.9%. The “Industrial and Service Sector Overtime Hours” indicator shifted from a Green Light to a Yellow-Red Light, with its rate of change surging from 0.9% to 4.5%. Each contributed 1 point, pushing up the overall composite score.
Chen Mei-chu analyzed that persistently strong AI demand not only boosted significant growth in exports of electronic components like chips and servers but also generated spillover effects, driving capacity expansion for machinery products and base metals, which in turn increased manufacturing overtime hours. Additionally, June coincided with the Dragon Boat Festival long weekend, World Cup events, and graduation season, leading to a sharp increase in retail and food and beverage sector revenues, which also pushed up overtime hours in the service sector. Notably, the annual growth rate of machinery and equipment simultaneously surged from 6.5% the previous month to 10.1%, indicating that AI demand has further extended into the semiconductor equipment sector.
The light signals for the remaining seven indicators remained unchanged. These include the Monetary Aggregate M1B, Stock Price Index, Industrial Production Index, Customs Export Value, Imports of Machinery and Electrical Equipment, and Wholesale, Retail, and Food and Beverage Sector Revenues, all of which stayed at a Red Light. Only the Manufacturing Business Climate Assessment remained at a Green Light.
Leading Index Rises for Fourth Month, Revealing Two Highlights
The NDC pointed out that the leading index has risen for four consecutive months, with a cumulative increase of 1.7%, revealing two key highlights. First, export order visibility continues to improve. Benefiting from China’s restrictions on lathe exports, demand for Taiwanese machine tools has emerged, with order visibility extending into the third quarter or even year-end. Furthermore, the new 10% tariff policy imposed by US President Trump has further enhanced the export competitive advantage of Taiwan’s traditional industries.
Second, the performance of semiconductor equipment imports has been exceptionally strong, with four consecutive months of growth from February to June. The nominal import value in June surged by 67.6% year-over-year, reflecting extremely stable investment pace and robust capacity expansion momentum among domestic manufacturers.
Regarding the coincident index, it has risen for ten consecutive months, with a cumulative increase of 7.43%. Domestic demand performance is also impressive, with wholesale, retail, and food and beverage revenues continuing to grow and the auto market showing a clear recovery. Data shows the wholesale sector’s automobile monthly growth rate was 9.7%, while the retail sector’s automobile and motorcycle monthly growth rate reached 23%, indicating a moderate expansion in domestic demand.
AI Infrastructure Demand is Clear, Supply Chain Visibility Extends into Second Half
Addressing market concerns that cash flow and capital regulation bottlenecks at some large Cloud Service Providers (CSPs) might impact Taiwan’s supply chain, Chen Mei-chu stated that current observations show CSP revenues and financial reports remain excellent, and global AI applications and real demand continue to expand.
She specifically highlighted that TSMC (2330.TW) announced an upward revision of its capital expenditure to approximately US$64 billion (about NT$2.1 trillion) during its July earnings call. This signals clear order demand and has helped extend visibility for the entire chip and server supply chain smoothly into the second half of the year, indicating that investment momentum in AI infrastructure has not waned.
Note: The US$64 billion figure cited by Chen Mei-chu is the upper end of the range. During its July 16 earnings call, TSMC raised its 2026 capital expenditure range from the beginning-of-year estimate of US$52-56 billion to US$60-64 billion (approximately NT$1.97-2.10 trillion). It also revised its full-year US dollar revenue growth forecast upward from approximately 30% to slightly above 40%. About 70-80% of this capital expenditure is allocated to advanced process technologies, around 10% to specialty technologies, and the remaining 10-20% to advanced packaging, testing, and mask-making.
Regarding inflation and commodity prices, Chen Mei-chu also mentioned that after the US-Iran ceasefire, crude oil prices quickly fell back to around US$68 per barrel (approximately NT$2,200), indicating that the fundamental supply and demand balance in the crude oil market remains stable. Coupled with increased US crude oil exports, OPEC’s release of reserves, and the rising share of alternative energy sources like renewables, this oil price fluctuation differs from traditional oil crises and has limited long-term impact on prices and inflation.
Looking ahead, the NDC stated that global AI infrastructure continues to expand and AI applications are accelerating. Coupled with the entry into the peak stocking season for consumer electronics in the second half of the year, export momentum is expected to be maintained. On the investment front, major domestic semiconductor manufacturers have increased their capital expenditures, which will help drive the expansion and upgrading of related supply chain production lines. Additionally, continued investment by major international firms in Taiwan will sustain investment momentum. On the consumption side, with a stable job market, the wealth effect driven by high stock market levels, and business opportunities from large-scale exhibitions and events, private consumption momentum is expected to persist.
It is worth looking at the full-year figures together. Multiple institutions predict that Taiwan’s economic growth rate for the full year of 2026 could exceed 10%. The latest forecasts from Academia Sinica, the Taiwan Institute of Economic Research, and the Chung-Hua Institution for Economic Research indicate that the second half of the year can still maintain growth above 8%. Precisely because the first half delivered double-digit high growth, raising the base period, the NDC described achieving over 8% in the second half as “quite remarkable.” As for whether the red light can stay on through the end of the year and break the record of nine consecutive months, Chen Mei-chu stated that the outlook is “cautiously optimistic, given the challenge of a high base period.”
However, within this generally optimistic monthly report, the NDC also flagged risks: the ongoing US-Iran conflict, evolving monetary policies of major central banks, and US tariff policies require close monitoring for their impact on global trade and inflation.