The Taiwanese Economy in January 2025

Following President Trump's inauguration, his administration has frequently implemented new tariff measures. Recent plans include imposing reciprocal tariffs on all imported goods. U.S. agencies will review non-reciprocal trade relationships with all trading partners and adjust final tariff policies based on country responses and investigation findings. This action may increase tariffs on U.S. trading partners, exacerbate global economic uncertainty, and impact international trade and financial markets.
In the manufacturing sector, benefiting from continued momentum in AI and high-performance computing opportunities, supply chain relocations have driven exports of information and communication technology products, leading technology industry manufacturers to maintain positive outlooks for both current month and six-month future performance. However, the shortened work days due to the Lunar New Year holiday and synchronized weakness in major overseas markets have caused traditional industries to view current economic conditions slightly less favorably compared to the previous month's survey. Additionally, Trump's new tariff policies have elevated global trade uncertainty, prompting traditional industries to maintain neutral future six-month outlooks.
The service sector benefited from Lunar New Year opportunities driving gift-giving demands, holiday shopping, and travel consumption, stimulating retail and restaurant sector performance for the month. Nevertheless, the restaurant and hotel sector continues to be affected by labor shortages, inconsistent service quality, and an expanding tourism deficit. Domestic tourism demand remains relatively weak, causing operators to maintain cautious or pessimistic views regarding the economic outlook for the next six months.
In the construction sector, January's composite indicator turned downward, primarily due to the real estate industry segment. This sector has been impacted by the central bank's seventh selective credit control measure, resulting in tightened market funding and significantly reduced housing transaction momentum, causing real estate developers to adopt a wait-and-see approach toward investment. In contrast, construction operators demonstrated stable performance in both current and future six-month indicators. While housing construction contractors face weakened order volumes due to poor housing market prospects, the Chiayi earthquake is expected to generate short-term demand for building demolition and structural reinforcement. Additionally, increased demand for green environmental engineering projects suggests that the construction industry outlook can be viewed as stable.
According to the Taiwan Institute of Economic Research (TIER), after model calculation, the manufacturing sector's composite indicator continued its upward trend in January 2025, while the service and construction sectors' composite indicators ended their previous three-month upward trend and turned downward.
In foreign trade, influenced by the Lunar New Year factor, January had fewer working days compared to the same period in 2024. However, strong demand for artificial intelligence and other emerging technologies, along with advanced procurement effects, maintained positive year-on-year export growth, with January's export growth rate declining from 9.2% in the previous month to 4.4%. Among major export products, continued momentum in artificial intelligence and high-performance computing opportunities, coupled with significantly advanced procurement, drove information and communication technology and audio-visual products to higher year-on-year growth rates than the previous month. Electronic components maintained positive growth despite reduced working days. Traditional export categories faced flat demand and reduced working days during the Lunar New Year, resulting in chemicals, metals and metal products, machinery, and plastic and rubber products shifting from positive to negative year-on-year growth rates. Regarding imports, flat traditional exports weakened corresponding raw material demands, and traditional categories were significantly affected by reduced working days during the Lunar New Year. January's overall import growth rate turned from positive to negative, declining from 30.4% in the previous month to -17.2%, ending ten consecutive months of positive growth. In total, January 2025's trade surplus reached $9.97 billion, growing 317.9%.
Regarding price trends, the overall CPI year-on-year growth rate expanded from 2.11% in the previous month to 2.66%, while the core CPI year-on-year growth rate also increased from 1.65% to 2.26%. Regarding the PPI, driven by price increases in certain manufacturing goods and utilities such as water, electricity, and gas, the PPI year-on-year growth rate rose slightly. However, declining agricultural product prices offset some increases, resulting in the overall PPI continuing its upward trend in January 2025, rising to 3.87%.
In the financial market, market liquidity conditions remained stable, with January 2025's financial sector overnight lending rate reaching a maximum of 0.827%, a minimum of 0.810%, and a weighted average rate of 0.820%, unchanged from the previous month but 0.133 percentage points higher than January 2024. Regarding the stock market, the U.S. Consumer Electronics Show drove AI-related stocks upward, and TSMC's capital expenditure exceeding market expectations provided support for Taiwan's stock market. However, rising U.S. Treasury yields and concerns about inflation triggered by Trump's tariff rumors constrained gains. Taiwan's weighted index closed at 23,525.41 points before the January market closure, up 2.13%, with an average daily trading volume of NT$353.385 billion. In terms of exchange rates, the New Taiwan Dollar fluctuated in response to U.S. economic data. In the first half of the month, reduced U.S. rate cut expectations strengthened the dollar, briefly pushing the New Taiwan Dollar above the 33 mark, but subsequent U.S. inflation data below market expectations weakened the dollar, allowing the New Taiwan Dollar to recover. Before the January market closure, the exchange rate closed at 32.682 to the dollar, appreciating by 0.30%.

Business Survey Outcomes

The proportion of manufacturing firms that perceived their business as better than expected in January was 17.4%, a decrease of 1.0 percentage points compared to 18.4% in the previous month. On the other hand, the proportion of those who perceived their business as worsening in the target month was 27.9%, an increase of 2.8 percentage points compared to the 25.1% reported in the previous month. Additionally, the proportion of manufacturing firms that perceived their business as remaining constant in the target month was 54.7%, a decrease of 1.8 percentage points compared to the 56.5% 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 37.3%, representing a significant increase of 10.7 percentage points compared to the 26.6% recorded in December. Conversely, the proportion of firms foreseeing a deteriorating economic outlook was 13.0%, marking a decline of 3.9 percentage points from the 16.9% reported one month earlier. Meanwhile, 49.7% of manufacturing firms perceived their business outlook as remaining constant over the next six months, a decrease from 56.5% in the previous month.
Overall, manufacturers stand optimistic regarding their outlook for the future.
The TIER Manufacturing Composite Indicator for January 2025, adjusted for seasonal factors, experienced a corrective rise. The index reached 98.00 points in January 2025, up 0.82 points from a revised 97.18 points in the previous month, showing an upward trend for three consecutive months.
In addition, the TIER Service Sector Composite Indicator for January 2025 exhibited a downward trajectory. It declined from a revised 97.59 points in December 2024 to 96.23 points—a drop of 1.36 points that ended a three-month streak of gains.
Lastly, the TIER Construction Sector Composite Indicator for January 2025, also adjusted for seasonal factors, stood at 101.82 points, down 6.63 points from 108.45 in the previous month, indicating a pivot after three consecutive months of gains.

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

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

Manufacturers’ sentiments that have improved in the January survey and is expected to remain upbeat over the next six months include:
Food, Frozen Food Manufacturing, Wood and Bamboo Products Manufacturing, Electronic Parts and Components Manufacturing, Education and Entertainment Articles Manufacturing, Banks, Insurance.

Manufacturers’ sentiments that have improved in the January survey and the trend is expected to continue for the next six months include:
Soft Drink Manufacturing, Petroleum and Coal Products Manufacturing, Bicycles Parts Manufacturing, Retail Sales, Restaurants and Hotels.