The Taiwanese Economy in February 2026

Since late February, geopolitical tensions in the Middle East have intensified, with the Iran-related conflict and energy market disruptions emerging as critical variables shaping the global economic outlook. Key uncertainties, including the duration of the conflict, the continuity of energy supply disruptions, and whether elevated energy prices will persist, are expected to weigh on inflation, real incomes, financial conditions, global economic growth, and the monetary policy trajectories of major central banks.
On the domestic manufacturing front, the Lunar New Year holiday reduced the number of working days in February, leading to a marked month-over-month decline in exports, industrial output, and export orders. Consequently, manufacturers adopted a more cautious assessment of current business conditions. Notwithstanding the heightened uncertainty surrounding Middle East developments, robust AI-driven demand continued to underpin an optimistic six-month outlook among semiconductor manufacturers and electrical machinery producers.
In the services sector, holiday-season effects provided a meaningful lift to travel and dining demand, strengthening operating momentum in the hospitality industry and prompting generally positive sentiment among operators. By contrast, financial services firms, while supported by equity market gains and sustained growth in core deposit, lending, and wealth management businesses, turned more guarded in their outlook as reduced trading days weighed on brokerage commission revenue. Meanwhile, retailers faced mounting cost pass-through pressures and pricing uncertainty amid oil price increases and rising inflation expectations stemming from the U.S.-Iran conflict, leaving the broader operating environment challenging.
In the construction industry, February activity was hampered by unresolved implementation issues related to new earthwork regulations, which caused delays and work stoppages at certain project sites. Combined with fewer working days, these factors contributed to a contraction in sector activity. Nevertheless, as the government gradually introduces remedial measures, public infrastructure projects continue to advance, and technology firms' plant construction demand driven by AI investment persists, the sector's business conditions are expected to stabilize over the coming six months. In contrast, the real estate market continued to face headwinds from sustained credit controls and a tight funding environment, as transaction volumes declined substantially. Even with a modest relaxation of loan-to-value limits on second residential properties for natural persons, the property market is unlikely to break out of its near-term consolidation phase.
According to survey results and model calculations, the Composite Indicator for manufacturing, services, and construction all declined in February 2026. The Manufacturing Composite Indicator ended a seven-consecutive-month upward streak and turned lower, while the Services Composite Indicator reversed a four-month upward trend. The Construction Composite Indicator recorded its second consecutive monthly decline.
On the external trade front, although emerging applications in artificial intelligence, high-performance computing, and cloud services continued to generate expanding commercial opportunities, a calendar effect whereby February 2026 had fewer working days than the same month of the prior year due to the timing of the Lunar New Year significantly compressed year-over-year growth rates. Export growth decelerated from 69.90% in January to 20.60% in February, while import growth contracted from 63.52% to 6.85%. To neutralize the distortion introduced by the holiday calendar shift, combining January and February figures reveals that cumulative two-month exports rose 44.46% year-over-year and cumulative imports grew 32.49%, reflecting sustained underlying trade momentum. By product category, information and communications technology products, electronic components, and electrical and mechanical equipment each recorded double-digit growth in the first two months of the year, driven by demand for emerging technology applications and product specification upgrades. Traditional industries, while lagging their technology counterparts, nonetheless returned to positive export growth, reversing the contraction recorded in the prior year.
Aggregating January and February output to account for the Lunar New Year calendar effect, domestic industrial production remained broadly resilient. Sustained demand from AI, high-performance computing, and cloud data services continued to support robust expansion in the ICT manufacturing sector, which posted 39.40% year-over-year growth. However, a subset of traditional industries continued to contract amid intensifying competitive pressures and insufficient demand recovery, partially offsetting overall momentum. On balance, average industrial production growth for January through February 2026 reached 22.95% year-over-year, with the manufacturing subsector expanding 24.78%.
On the domestic demand side, the Lunar New Year and the February 28th Peace Memorial Day holidays generated significant foot traffic at retail and dining establishments, augmented by pre-holiday procurement spending. Most retail categories posted positive growth; February retail sales totaled NT$383.1 billion, up 7.73% year-over-year, or 14.68% excluding motor vehicle and motorcycle dealers. In the food and beverage sector, New Year's Eve family gatherings and holiday travel drove robust dining and beverage demand, with February sales reaching NT$100.3 billion, a 21.11% year-over-year increase. Cumulative food and beverage sales for January through February 2026 rose 4.55% from the same period of 2025.
Stripping out the Lunar New Year distortion by averaging the January through February period, the headline Consumer Price Index edged down from a year-over-year rate of 1.30% in December 2025 to 1.23%, while the core CPI rose from 1.83% to 1.93%.
As of end-February 2026, the number of workers on reduced working hours stood at 3,770, with metalworking and electromechanical industries bearing the most pronounced impact. This figure represented a decline of 1,905 workers from the end of January. On the wage front, average total earnings in January 2026 were NT$81,262, down 31.27% year-over-year, reflecting a high base effect from the previous year's bonus payments; regular earnings stood at NT$51,676, up 3.03% year-over-year. After adjusting for price changes, real regular earnings grew 2.32% year-over-year, while real total earnings contracted 31.75%.
In domestic financial markets, the weighted average interest rate on new loans extended by the five major state-owned banks (Bank of Taiwan, Taiwan Cooperative Bank, Land Bank of Taiwan, Hua Nan Commercial Bank, and First Commercial Bank) was 2.086% in February, down 0.5 basis points from January's 2.091%. The Taiwan Capitalization Weighted Stock Index closed at 35,414.49 at end-February, a substantial gain of 10.45% from end-January, supported by continued AI supply chain optimism despite renewed uncertainty surrounding U.S. trade policy. Average daily turnover reached NT$815.422 billion. In the foreign exchange market, the New Taiwan Dollar initially depreciated in the first half of February as foreign institutional investors reduced their equity holdings and repatriated capital, while domestic life insurers increased their foreign currency purchases amid a strengthening U.S. Dollar Index. In the second half of the month, foreign investors shifted to net buying, and capital inflows drove an appreciation of the New Taiwan Dollar. Overall, the New Taiwan Dollar closed at 31.251 per U.S. Dollar at end-February, appreciating 0.69% from end-January, following an intra-month pattern of initial depreciation followed by recovery.

Business Survey Outcomes

The proportion of manufacturing firms that perceived their business conditions as improved in the current survey period was 9.7%, a decrease of 15.4 percentage points from 25.1% in the prior month. Conversely, the proportion of those reporting a deterioration was 41.0%, a significant increase of 16.6 percentage points from 24.4% in the prior month. The remaining 49.3% perceived business conditions as unchanged, a slight decrease of 1.2 percentage points from 50.5% in the prior month.
Looking ahead, the share of manufacturers anticipating an improvement in business over the next six months stood at 39.6%, an increase of 13.8 percentage points from 25.8% in the prior month. Similarly, the proportion of firms foreseeing a deteriorating outlook was 17.5%, up 1.0 percentage point from 16.5% in the prior month. Meanwhile, the share of manufacturing firms expecting business conditions to remain constant decreased 14.9 percentage points to 42.8% from 57.7% in the prior month.
The Manufacturing Composite Indicator for February stood at 96.41, down 2.10 points from the revised January reading of 98.51, ending its seven-consecutive-month upward streak. The Services Composite Indicator declined to 94.55, down 0.87 points from 95.42 in January, reversing a four-consecutive-month upward trend. The Construction Composite Indicator fell to 95.81 in February, down 4.11 points from 99.92 in January, marking its second consecutive monthly decline.

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