The Taiwanese Economy in February 2025

The global economic landscape remains overshadowed by policy uncertainties stemming from the Trump administration's trade approaches, triggering an escalation of protectionist sentiments. Recent monetary authorities in the United States and Europe have systematically downgraded economic growth forecasts while simultaneously adjusting inflation expectations, signaling persistent downside risks to the global economic trajectory.
In the manufacturing sector, following the post-Lunar New Year resumption of business operations, February witnessed a notable rebound in export volumes and external orders, rendering manufacturers' economic outlook for the current month more optimistic compared to the previous period. Despite heightened uncertainties from ongoing trade policies that potentially impact global economic growth and inflationary pressures—which could influence central banks' monetary policy adjustments—domestic semiconductor advanced process technologies and information and communication supply chain demands remain robust. Consequently, electronics and machinery industries maintain a favorable economic outlook for the next 6 months.
The service sector experiences challenges post-Lunar New Year festivities, with reduced consumer spending and dining-out demands negatively impacting the retail, restaurant, and hotel sectors' current month's economic outlook. Moreover, escalating policy uncertainties have eroded business and consumer investment confidence, prompting financial service providers to adopt more conservative or pessimistic perspectives in both the current month and the next 6 months' comparative assessments.
In the construction sector, while residential market dynamics appear weak and cost pressures persist, ongoing public infrastructure projects provide stabilizing momentum. Most public transportation and infrastructure projects are progressing as scheduled, with state-owned enterprises releasing natural gas power plant engineering contracts and the Xidong Metro line set to commence construction in March. This pipeline of projects enables construction firms to perceive a gradually improving economic outlook for the next 6 months. Despite increased working days stimulating northern real estate transactions and technology sector support for industrial property demand, continued central bank credit controls, anti-speculation policies, and diminishing effects of youth housing incentive programs contribute to subdued residential market transactions. Consequently, the real estate market composite indicator remains conservatively positioned.
In foreign trade, due to the different Lunar New Year timing, February experienced more working days compared to the previous year. Coupled with sustained robust information and communication technology (ICT) product exports, the export year-on-year growth rate significantly expanded from 4.38% in the previous month to 31.48%. Similarly, import growth transitioned from a 17.17% contraction to a 47.84% expansion. To mitigate seasonal distortions, analyzing the cumulative first two months reveals exports grew 16.81% and imports increased 9.14% compared to the same period in 2024. The trade surplus for January-February 2025 reached $16.62 billion, representing a 59.64% increase. Regarding primary export products, artificial intelligence and high-performance computing continued driving momentum, with early customer procurement further bolstering ICT and audiovisual product performance.
On the price front, due to shifting holiday comparisons, the overall Consumer Price Index (CPI) year-on-year growth decelerated from 2.66% in January to 1.58% in February, with core CPI similarly declining from 2.26% to 0.98%. Considering the January-February average to normalize seasonal variations, overall CPI marginally increased from 2.10% in December 2024 to 2.12% in early 2025, while core CPI slightly decreased from 1.65% to 1.61%. Influenced by low vegetable base effects, delayed impacts from the previous typhoon and heavy rainfall on fruit prices, and rising dining-out expenses, food price inflation expanded from 3.69% in December 2024 to 3.85% in early 2025, contributing 1.05 percentage points to the total index, a 0.06 percentage point increase. Regarding the Producer Price Index (PPI), price increases in agricultural products, electronic components, computers, electronic products, and optical equipment, coupled with previous electricity price adjustments, drove the January-February PPI year-on-year growth from 3.10% in December to 3.68%.
In the financial market, liquidity conditions remained stable. In February 2025, the overnight interbank lending rates ranged between 0.812% and 0.825%, with a weighted average of 0.820%, unchanged from the previous month but 0.127 percentage points higher than the same period in 2024. On the stock market front, early February saw the previous administration postponing tariffs on Canada and Mexico while maintaining 10% tariffs on China and considering expansions to steel, aluminum, chips, and pharmaceuticals, which highlighted trade policy uncertainties and suppressed electronic sector performance. However, efforts to end the Russia-Ukraine conflict and post-war reconstruction expectations bolstered traditional industrial stocks like steel and petrochemicals. The Taiwan Weighted Index closed at 23,053.18 points, declining 2.01%, with an average daily trading volume of NT$394.282 billion. Regarding foreign exchange, frequent tariff policy adjustments created international trade uncertainties, prompting foreign investors to increase selling pressure on Taiwanese stocks and weakening the New Taiwan Dollar. The exchange rate closed at 32.82 at February's end, representing a 0.42% depreciation.

Business Survey Outcomes

The proportion of manufacturing firms that perceived their business as better than expected in February was 32.0%, a rally of 14.5 percentage points compared to 17.5% in the previous month. On the other hand, the proportion of those who perceived their business as worsening in the target month was 24.5%, a decrease of 3.9 percentage points compared to the 28.4% reported in the previous month. Additionally, the proportion of manufacturing firms that perceived their business as remaining constant in the target month was 43.5%, a drop of 10.6 percentage points compared to the 54.1% recorded in the previous month.
Furthermore, in the target month, the segment of manufacturers who anticipated an improvement in their business over the next six months stood at 36.3%, representing a dip of 0.6 percentage points compared to the 36.9% recorded in January. Conversely, the proportion of firms foreseeing a deteriorating economic outlook was 12.7%, marking a slight decline of 0.2 percentage points from the 12.9% reported one month earlier. Meanwhile, 51.0% of manufacturing firms perceived their business outlook as remaining constant over the next six months, an increase from 50.2% in the previous month. Overall, manufacturers stand conservatism regarding their outlook for the future.
The TIER Manufacturing Composite Indicator for the target month in 2025, adjusted for seasonal factors, experienced a corrective decline. The index reached 97.94 points in February 2025, marginally declining 0.01 points from 97.95, with manufacturers' economic outlook remaining stable.
In addition, the TIER Service Sector Composite Indicator for the target month in 2025 exhibited a downward trajectory. It declined from a revised 95.76 points in January 2025 to 93.28 points—a drop of 2.48 points, marking two consecutive months of decline.
Lastly, the TIER Construction Sector Composite Indicator for February 2025, also adjusted for seasonal factors, stood at 102.46 points, up 0.48 points from 101.98 in the previous month, reflecting a return to an upward trend.

Analyses and Outlook of Industries

Following are manufacturers' sentiments that are industry-specific in the monthly TIER surveys:

Manufacturers’ sentiments that have been in decline in the February survey and are expected to deteriorate over the next six months include:
Motor Vehicles Manufacturing.
　
Manufacturers’ sentiments that have been in decline in the February survey, but are expected to improve over the next six months include:
Food, Slaughtering, Frozen Food Manufacturing, Edible Oil Manufacturing, Flour Milling and Grain Husking, Soft Drink Manufacturing, Prepared Animal Feeds Manufacturing, Non-metallic Mineral Products Manufacturing, Glass and Glass Products Manufacturing, Audio and Video Electronic Products Manufacturing, Precision Instruments Manufacturing, Restaurants and Hotels, Banks.
　
Manufacturers’ sentiments that have been in decline in the February survey and are expected to remain sluggish over the next six months include:
Printing, Chemical Products Manufacturing, Petroleum and Coal Products Manufacturing, Cement and Cement Products Manufacturing, Electrical Appliances and Housewares Manufacturing, Retail Sales.
　
Manufacturers surveyed who felt the February outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Textiles Mills, Yarn Spinning Mills, Fabric Mills, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Leather, Fur and Allied Product Manufacturing, Man-made Fibers Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Motor Parts Manufacturing, Real Estate Investment.
　
Manufacturers surveyed who felt the February outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Supplies Manufacturing and Repairing, Electronic Machinery, Communications Equipment and Apparatus Manufacturing, Electronic Parts and Components Manufacturing, Basic Civil Structure Construction, Telecommunication Services.
　
Manufacturers surveyed who felt the February outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Wood and Bamboo Products Manufacturing, Paper Manufacturing, Rubber Products Manufacturing, Plastic Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Metal Dies, Screw, Nut Manufacturing, Electrical Machinery, Data Storage Media Units Manufacturing and Reproducing, Transport Equipment Manufacturing and Repairing, Bicycles Manufacturing, Construction, Wholesale.
　
Manufacturers’ sentiments that have improved in the February survey and is expected to deteriorate over the next six months include:
Industrial Chemicals, Petrochemicals Manufacturing, Securities.
　
Manufacturers’ sentiments that have improved in the February survey and is expected to remain upbeat over the next six months include:
Electric Wires and Cables Manufacturing, Education and Entertainment Articles Manufacturing, Insurance.
　
Manufacturers’ sentiments that have improved in the February survey and the trend is expected to continue for the next six months include:
Plastics and Rubber Raw Materials, Motorcycles Manufacturing, Motorcycles Parts Manufacturing, Bicycles Parts Manufacturing, Transportation and Storage.