The Taiwanese Economy in May 2025

Recently, Israel and Iran have officially entered into warfare, with U.S. military intervention in the Israel-Iran conflict. The escalating situation threatens to trigger a new wave of supply chain disruptions and further elevate the risk of oil price increases. Meanwhile, although the U.S. government has taken action to ease tariff tensions to stabilize the overall economic and financial environment, the direction of its trade policy remains unclear, and uncertainty remains high.
On the domestic front, while demand from AI, high-performance computing, and cloud industries remains robust, foundry and assembly and testing sectors experienced slightly declining revenues in May due to elevated base periods caused by downstream customers' earlier inventory pull-ins. Additionally, the significant appreciation of the New Taiwan Dollar in May made revenue fluctuations more pronounced for export-oriented industries. At the same time, demand for certain traditional products continues to be weak and is affected by competitive pressure from overseas peers offering lower prices, causing manufacturers to adopt a more conservative outlook on the current month's economic conditions compared to the previous month's survey. Looking ahead, the escalation of the Israel-Iran conflict has raised concerns about energy, shipping, and economic stability, and with unclear progress in trade negotiations between various countries and the United States, global economic uncertainty remains substantial, leading manufacturers to adopt a wait-and-see attitude toward economic conditions in the next six months.
In the service sector, benefiting from positive developments in U.S. technology stocks and progress in U.S.-China negotiations, foreign investors made substantial net purchases, driving both trading volume and prices higher in Taiwan's stock market in May. This boosted brokerage commission fees and proprietary trading profits, with the securities industry generally optimistic about the current month's economic conditions. However, the insurance industry was affected by the significant appreciation of the New Taiwan Dollar, which increased hedging costs and limited gains from stocks and bonds, with multiple companies experiencing losses. Therefore, the insurance industry's economic conditions for the current month are assessed to continue in recession.
In the construction sector, the construction industry's economic conditions remained flat in May. Although technology office buildings and certain large-scale public projects such as highways and water conservancy construction progressed ahead of schedule, power and rail projects lagged behind. Additionally, with multiple factory and residential construction projects completed and recognized in the previous month, the higher base period prevented obvious growth in the current month's performance. Looking ahead, the advancement of wind power, hydroelectric, and liquefied natural gas projects can support operations. However, due to tariff uncertainties, some high-tech factory expansion plans have become more cautious, and overall economic conditions are still viewed as flat. Supported by a wave of new housing deliveries, the number of building transfers in the six major municipalities in May showed slight growth compared to the previous month. However, for the next six months, constrained by continued central bank control policies, increased housing market supply, and high uncertainty regarding tariffs and geopolitical risks, the housing market is expected to show declining transaction volumes and softening prices, with poor prospects for both residential and commercial real estate.
According to the Taiwan Institute of Economic Research (TIER), after model simulations, the composite indicators for manufacturing, service, and construction industries in May continued their declining trend. Among these, the manufacturing composite indicator has declined for four consecutive months, while the service and construction industries have weakened for five consecutive months, though the latter two sectors showed significant convergence in their monthly declines.
First, regarding external trade, continued strong demand for emerging technology applications, combined with customers accelerating inventory pull-ins during the U.S. tariff buffer period, drove May exports to climb to $51.74 billion, breaking through the $50 billion threshold for the first time. This expanded the May export growth rate from the previous month's 29.89% to 38.63%. Although imports of capital equipment remained strong, the growth rates for agricultural and industrial raw materials and consumer goods decreased compared to the previous month, causing the import growth rate to contract from the previous month's 32.29% to 25.03%. On the export side, benefiting from continued AI and high-performance computing business opportunities, plus customers increasing purchases during the U.S. tariff buffer period, the growth rates for information and communication technology and audiovisual products, as well as electronic components, surged significantly. In contrast, traditional industries faced pressure, with growth rates for basic metals, plastic and rubber products, and chemicals all declining. Mineral products were significantly affected by refinery maintenance and weak international oil prices, showing a notable decline in growth rate. Cumulatively, exports from January to May 2025 grew 24.24% compared to the same period last year, while imports grew 21.24%. The total trade surplus from January to May 2025 was $43.638 billion, growing 38.94%.
Regarding prices, the overall CPI growth rate in May decreased from April's 2.03% to 1.55%, while the core CPI growth rate decreased from April's 1.67% to 1.61%. For PPI, given the significant appreciation of the New Taiwan Dollar against the U.S. Dollar in May, combined with declining international market prices for petroleum and coal products, chemical materials and their products and pharmaceuticals, basic metals, and electronic components, the overall PPI growth rate in May 2025 decreased from April's 0.55% to -4.30%. Cumulatively, the CPI growth rate from January to May 2025 was 2.04%, and the PPI growth rate was 1.45%.
In the labor market, the unemployment rate in May 2025 was 3.30%, down 0.02 percentage points from the previous month. The number of unemployed due to workplace business contraction or closure decreased compared to the same month last year, causing the May unemployment rate to fall 0.04 percentage points compared to the same month last year. The average unemployment rate from January to May this year was 3.32%, down 0.04 percentage points compared to the same period last year.
In the domestic financial market, the funding environment remained stable. In May 2025, the highest overnight interbank lending rate for financial institutions was 0.824%, the lowest was 0.817%, and the weighted average rate was 0.820%, up 0.002 percentage points from the previous month and 0.005 percentage points higher than the same month in 2024. In the stock market, as the U.S. and China initiated formal trade negotiations and both sides temporarily suspended retaliatory tariff measures, this helped ease the financial market's pessimistic expectations about economic prospects, boosted market confidence, and drove global stock markets higher. Taiwan's weighted index closed at 21,347.30 points at the end of May, up 5.50%, with an average daily trading volume of NT$335.072 billion. Regarding exchange rates, against the backdrop of heightened U.S. policy uncertainty since the beginning of this year, financial market confidence in U.S. dollar assets has been undermined, and the dollar trend has turned weak. In early May, financial markets heard that Asian currency negotiations with the United States involved exchange rate issues, further triggering market panic sentiment. Exporters and retail investors sold off dollars, driving the New Taiwan Dollar to appreciate rapidly in early May. Subsequently, with the President and Central Bank Governor successively releasing stabilizing messages and active central bank intervention, market expectations stabilized, and foreign exchange market sentiment gradually became rational. The exchange rate closed at 29.929 per dollar at the end of May, appreciating 6.98%.

Business Survey Outcomes

In May, 11.5% of manufacturing firms perceived their business as better than expected, down 6.1 percentage points from April's 17.6%. Meanwhile, 38.4% reported worsening conditions (up 0.4 percentage points from 38.0%), while 50.1% saw conditions as unchanged, rising 5.7 percentage points from the previous month's 44.4%.
Looking ahead, 18.5% of manufacturers anticipate business improvement over the next six months, down 3.4 percentage points from April's 21.9%. Those expecting deterioration decreased to 29.8% (down 1.6 percentage points from 31.4%), while 51.7% foresee stable conditions, up 5.0 percentage points from 46.7%. Overall, manufacturers maintain a cautious outlook on future economic prospects.
The TIER Manufacturing Composite Indicator continued its downward trend, falling 4.74 points to 85.83 in May 2025 from April's 90.57, marking the fourth consecutive monthly decline.
Similarly, the Service Sector Composite Indicator dropped 0.35 points to 85.32 from April's revised 85.67, extending its declining streak to five months.
The Construction Sector Composite Indicator showed the smallest decline, falling just 0.10 points to 90.41 from April's 90.51, also representing its fifth consecutive monthly decrease.

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 May survey and are expected to deteriorate 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, Paper Manufacturing, Industrial Chemicals, Petrochemicals Manufacturing, Plastics and Rubber Raw Materials, Man-made Fibers Manufacturing, Chemical Products Manufacturing, Iron and Steel Basic Industries, Fabricated Metal Products Manufacturing, Screw, Nut Manufacturing, Motor Parts Manufacturing, Bicycles Manufacturing, Bicycles Parts Manufacturing, Wholesale, Insurance.
　 　
Manufacturers’ sentiments that have been in decline in the May survey, but are expected to improve over the next six months include:
None.
　 　
Manufacturers’ sentiments that have been in decline in the May survey and are expected to remain sluggish over the next six months include:
Slaughtering, Edible Oil Manufacturing, Flour Milling and Grain Husking, Printing, Glass and Glass Products Manufacturing, Metal Structure and Architectural Components Manufacturing, Transport Equipment Manufacturing and Repairing, Motor Vehicles Manufacturing, Motorcycles Manufacturing, Motorcycles Parts Manufacturing, Precision Instruments Manufacturing.
　 　
Manufacturers surveyed who felt the May outlook was the same as the previous month, but the outlook is expected to exacerbate over the next six months include:
Metal Dies, Cutlery and Tools Manufacturing, Construction, Real Estate Investment.
　 　
Manufacturers surveyed who felt the May outlook was the same as the previous month, but the outlook is expected to improve over the next six months include:
Food, Electronic Machinery.
　 　
Manufacturers surveyed who felt the May outlook was the same as the previous month and the trend is expected to continue for the next six months include:
Manufacturing, Prepared Animal Feeds Manufacturing, Wood and Bamboo Products Manufacturing, Petroleum and Coal Products Manufacturing, Rubber Products Manufacturing, Plastic Products Manufacturing, Non-metallic Mineral Products Manufacturing, Porcelain and Ceramic Products Manufacturing, Cement and Cement Products Manufacturing, Machinery and Equipment Manufacturing and Repairing, Industrial Machinery, Electrical Machinery, Electric Wires and Cables Manufacturing, Electrical Appliances and Housewares Manufacturing, Communications Equipment and Apparatus Manufacturing, Electronic Parts and Components Manufacturing, Basic Civil Structure Construction, Restaurants and Hotels, Telecommunication Services, Transportation and Storage.
　 　
Manufacturers’ sentiments that have improved in the May survey and is expected to deteriorate over the next six months include:
None.
　 　
Manufacturers’ sentiments that have improved in the May survey and is expected to remain upbeat over the next six months include:
Frozen Food Manufacturing, Soft Drink Manufacturing, Electrical Machinery, Supplies Manufacturing and Repairing, Education and Entertainment Articles Manufacturing.
　 　
Manufacturers’ sentiments that have improved in the May survey and the trend is expected to continue for the next six months include:
Audio and Video Electronic Products Manufacturing, Data Storage Media Units Manufacturing and Reproducing, Retail Sales, Banks, Securities.