TAIPEI (Taiwan News) — Taiwan’s service sector sentiment rose to a more than five-year high in May, driven by a stock market-led wealth effect that boosted domestic demand, the Taiwan Institute of Economic Research said Thursday.
The institute said all three major sectors – manufacturing, services, and construction – improved in May, reflecting broader economic momentum, per CNA. It added that Taiwan’s growth is no longer driven solely by exports and investment, with domestic demand playing a larger role.
The manufacturing index rose to 99.58 points, up 2.66 points from a month earlier, marking a second straight monthly gain and the highest level since June 2024. The services index climbed to 100.62 points, rising for a third consecutive month and reaching its highest level since April 2021.
The construction index saw the sharpest increase, jumping 9.64 points to 103.99 in May. The Taiwan Institute of Economic Research said the gain was linked in part to AI-related investment and ongoing factory construction by technology firms.
TIER Macroeconomic Forecasting Center Director Sun Ming-te (孫明德) said manufacturing improved after a weak March, when sentiment fell due to geopolitical tensions involving the US and Iran. He said sentiment stabilized in April and May as conditions eased and supply chain pressures improved.
Sun said the services sector was supported by two main factors: gains in Taiwan’s stock market, which lifted sentiment among brokerage firms, and rising corporate lending demand tied to AI-related investment. He said stronger financial market activity also boosted bank lending and fee income.
He added that the stock market rally has also lifted private consumption, with government agencies recently raising full-year growth forecasts. Sun said consumption growth above 3% is unusually strong by historical standards and reflects a clear wealth effect.
Sun said Taiwan’s economic growth is now being supported not only by exports and investment, but also by stronger domestic demand. He said this marks a shift in the structure of growth as financial market gains feed into consumption.
