The Taiwanese Economy in August 2025

The U.S. economy maintained growth in the first half, driven by private consumption and AI investment. However, the Fed Chair recently noted that the labor market has noticeably cooled, with near-term inflation pressures persisting. While negative impacts from U.S. reciprocal tariffs have moderated and trade policy uncertainty has declined—supporting global manufacturing recovery—industry-specific tariffs remain partially undisclosed, and escalating geopolitical conflicts create numerous variables in the global economic outlook.
As U.S. reciprocal tariff policies gradually clarify and the New Taiwan Dollar weakened in August, impacts from tariffs and exchange rates have become less pronounced than in previous months. Manufacturing firms' sentiment regarding current-month conditions improved significantly compared to last month's survey. However, industry performance remains divergent. Driven by AI and high-performance computing demand, the electronics and machinery sector shows a notably higher proportion of firms optimistic about current-month conditions versus pessimistic ones. Meanwhile, China's production cuts and market rescue measures have pushed international steel prices higher, reducing the proportion of steel industry firms pessimistic about current-month and six-month prospects. In services, retail, and hospitality sectors benefited from summer peak season, festive consumption, and heat-avoidance opportunities, showing widespread optimism for current-month conditions. The securities sector, aided by Taiwan's stock market volume and price gains in August, saw simultaneous benefits across brokerage, proprietary trading, and underwriting businesses, with operators maintaining largely optimistic attitudes toward current-month conditions.
In construction, while post-disaster reconstruction affected some public works progress, previously delayed projects have begun delivery, driving sales, keeping August conditions roughly stable. Looking ahead, increased public infrastructure budgets and AI-driven factory and equipment investment provide sufficient orders, with growth prospects expected. For real estate, August transaction volumes declined due to mortgage tightening and weakening new home delivery momentum. Looking forward, despite positives from new youth housing loan exclusions and extended home-switching deadlines, demand remains constrained by central bank controls that haven't loosened, banks' continued caution toward mortgage business, and continuously increasing new supply, keeping the housing market in near-term volume contraction and gradual price decline.
According to the Taiwan Institute of Economic Research (TIER), after model simulations, the composite indicators for manufacturing, services, and construction sectors all rose in August 2025. Manufacturing has shown two consecutive months of growth, construction shifted from stable to rising, and services rebounded after a brief one-month decline.
In foreign trade, benefiting from sustained AI emerging technology application demand and peak stocking season for consumer electronics, technology product shipment momentum continued, maintaining high-level import-export performance in August. Export growth rate decreased from 42.0% last month to 34.1%, while import growth rate increased from 20.5% to 29.5%. Among major export commodities, high-tech and traditional industries continued divergent performance. Benefiting from AI and high-performance computing opportunities, information and audiovisual products and electronic components grew substantially by 79.9% and 34.6% respectively, totaling 55.5% growth, while other traditional industry exports declined 4.8%, with plastic and rubber products decreasing 12.1% and basic metals and products falling 7.1%, mainly due to weak market demand and overseas capacity excess.
In domestic production, sustained demand for artificial intelligence, high-performance computing, and cloud data services, plus consumer electronics stocking momentum, supported steady growth in the information electronics industry. However, traditional industries continued production cuts due to weak market demand and conservative customer ordering, partially offsetting electronics growth. Overall, August manufacturing production index reached 118.22, up 2.94% monthly and 15.48% annually.
For domestic consumption, August retail sales reached NT$391.5 billion, up 0.36% annually, reversing previous months' decline to positive growth. General merchandise retail grew 2.9% overall, with department stores up 4.5% driven by new mall operations, summer customer activities, and brand entries, while convenience stores rose 4.0% boosted by Father's Day, Valentine's Day, and summer consumption demand, with strong fresh food and ice drink sales performance. Overall, retail showed stabilization amid various format changes, with January-August cumulative revenue still down 0.68% from last year, though general merchandise retail maintained 3.01% growth. For food services, August revenue reached NT$93.3 billion, up 4.80% annually, with restaurants and beverage shops benefiting from summer dining out and festive gathering demand, plus seasonal dishes and co-branded products attracting purchases, keeping restaurant revenue growth positive, with January-August cumulative food service revenue up 3.14% from last year.
Regarding prices, typhoon impacts caused notable increases in vegetable and meat prices, expanding food category price growth from 2.90% in July to 3.18% in August, contributing 0.85 percentage points to the overall index, up 0.06 percentage points from last month. Additionally, transportation and communication categories saw expanded overall price decline due to falling fuel fee price growth rates. August overall CPI growth expanded from 1.53% in July to 1.60%, with core CPI growth also expanding from 1.69% in July to 1.74%. For PPI, declines in chemical materials and products, pharmaceuticals, petroleum and coal products, basic metals, and electronic components were partially offset by rising poultry and livestock product prices plus last October's electricity price adjustment factors, reducing PPI index growth from -6.63% in July to -4.98%. Cumulative January-August 2025 CPI growth was 1.83%, with PPI growth at -1.27%.
In the labor market, coinciding with graduation season, first-time job seekers increased unemployment numbers from last month, plus those unemployed due to workplace downsizing or closure also increased from last month. August 2025 unemployment rate was 3.45%, up 0.05 percentage points from last month and down 0.03 percentage points from last year's same month, with January-August average unemployment rate at 3.35%, down 0.03 percentage points from last year's same period.
For wages, July total salary for domestic full-time employees was NT$69,088, up 5.21% annually. July average regular salary was NT$50,670, up 2.98% annually. After adjusting for price increases, January-July 2025 average real regular salary grew 1.27% annually, with January-July cumulative real total salary up 3.80% annually.
In domestic financial markets, August weighted average interest rate for new loans by the five major domestic banks (Bank of Taiwan, Land Bank, Taiwan Cooperative Bank, Hua Nan Bank, and First Bank) was 2.196%, down 0.009 percentage points from July's 2.205%, due to declines in both working capital and capital expenditure loan rates from July. For equities, moderate U.S. inflation data and labor market performance weaker than previously expected, heated expectations for Fed rate cuts in September, plus Trump's indication that U.S.-investing companies may be exempt from semiconductor tariffs, benefiting domestic semiconductor leaders with potential tariff exemptions, driving Taiwan stock gains with significantly expanded trading volume. Taiwan Weighted Index closed August at 24,233.10 points, up 2.93%, with average daily trading volume of NT$448.8 billion. For exchange rates, August foreign investment in Taiwan stocks showed net selling, ending three consecutive months of net buying since May, with clear fund outflow bias in forex markets. August foreign investment shifted from net inflow to net outflow of US$1.366 billion, causing New Taiwan Dollar depreciation, closing August at 30.605 per USD, down 2.25%.

Business Survey Outcomes

The proportion of manufacturing firms that perceived their business as better than expected in August was 22.8%, an increase of 5.1 percentage points compared to 17.7% in the previous month. On the other hand, the proportion of those who perceived their business as worsening in the target month was 33.6%, a decrease of 4.0 percentage points compared to the 37.6% reported in the previous month. Additionally, the proportion of manufacturing firms that perceived their business as remaining constant in the target month was 43.6%, a slight drop of 1.1 percentage points compared to the 44.7% 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 17.7%, representing a marginal increase of 0.7 percentage points compared to the 17.0% recorded in July. Conversely, the proportion of firms foreseeing a deteriorating economic outlook was 34.4%, marking an increase of 1.7 percentage points from the 32.7% reported one month earlier. Meanwhile, 47.9% of manufacturing firms perceived their business outlook as remaining constant over the next six months, a slight drop from 50.4% in the previous month, representing a decline of 2.5 percentage points.
For the TIER Manufacturing Composite Indicator for the target month in 2025, the index reached 88.88 points in August 2025, an increase of 1.79 points from 87.09, recording two months of sustained growth. In addition, the TIER Service Sector Composite Indicator for the target month in 2025 reached 88.64 in August 2025, up 1.01 points from the revised July figure of 87.63. Lastly, the TIER Construction Sector Composite Indicator for August 2025, also adjusted for seasonal factors, stood at 97.41 points, up 2.66 points from 94.75 in the previous month.

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 August survey and are expected to deteriorate over the next six months include:
Plastics and Rubber Raw Materials, Screw, Nut Manufacturing, Machinery and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing, Industrial Machinery, Electrical Appliances and Housewares Manufacturing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Transportation and Storage.

Manufacturers’ sentiments that have been in decline in the August survey, but are expected to improve over the next six months include:
Motor Vehicles Manufacturing.

Manufacturers’ sentiments that have been in decline in the August survey and are expected to remain sluggish over the next six months include:
Porcelain and Ceramic Products Manufacturing, Cement and Cement Products Manufacturing, Transport Equipment Manufacturing and Repairing, Real Estate Investment.

Manufacturers surveyed who felt the August outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Industrial Chemicals, Petrochemicals Manufacturing, Fabricated Metal Products Manufacturing, Motor Parts Manufacturing, Education and Entertainment Articles Manufacturing, Wholesale.

Manufacturers surveyed who felt the August outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Edible Oil Manufacturing, Flour Milling and Grain Husking, Wood and Bamboo Products Manufacturing, Precision Instruments Manufacturing, Construction, Basic Civil Structure Construction.

Manufacturers surveyed who felt the August outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Slaughtering, Prepared Animal Feeds Manufacturing, Textiles Mills, Yarn Spinning Mills, Leather, Fur and Allied Product Manufacturing, Paper Manufacturing, Printing, Man-made Fibers Manufacturing, Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing, Plastic Products Manufacturing, Non-metallic Mineral Products Manufacturing, Glass and Glass Products Manufacturing, Iron and Steel Basic Industries, Metal Dies, Metal Structure and Architectural Components Manufacturing, Electrical Machinery, Electric Wires and Cables Manufacturing, Communications Equipment and Apparatus Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Motorcycles Manufacturing, Motorcycles Parts Manufacturing, Telecommunication Services.

Manufacturers’ sentiments that have improved in the August survey and is expected to deteriorate over the next six months include:
None.

Manufacturers’ sentiments that have improved in the August survey and is expected to remain upbeat over the next six months include:
Frozen Food Manufacturing, Electrical Machinery, Supplies Manufacturing and Repairing, Electronic Machinery, Electronic Parts and Components Manufacturing, Retail Sales, Banks, Securities.

Manufacturers’ sentiments that have improved in the August survey and the trend is expected to continue for the next six months include:
Food, Soft Drink Manufacturing, Fabric Mills, Apparel, Clothing Accessories and Other Textile Product Manufacturing, Chemical Products Manufacturing, Audio and Video Electronic Products Manufacturing, Restaurants and Hotels, Insurance.