- By Crystal Hsu / Staff reporter
NDC Business Surveillance Shifts to Growth Perspective
Taiwan's economic momentum softened last month, with a drop in car sales and a dip in consumer activity causing the National Development Council (NDC) to report a green indicator, signaling a more modest pace of expansion, the NDC revealed yesterday.
The composite score slipped by two points to 31, transitioning the indicator from "yellow-red" to "green." The decline in the indicator was largely due to a decrease in wholesale, retail, and food service revenue, as well as a substantial fall in car registrations, according to the Department of Economic Development Deputy Director, Chen Mei-chu (陳美菊).
"Although the shift doesn't suggest a sharp downturn, the dip in car sales undeniably casts a shadow over sentiment," Chen noted.
A closer look at the data shows that new vehicle registrations dropped 23.1 percent year-on-year, even though May is traditionally a busy period for deliveries. Furthermore, wholesale revenue—which takes up nearly 70 percent of the sector—fell by 16.8 percent year-on-year, while retail sales, accounting for 25.8 percent, dropped by 18 percent. The NDC attributed this fall to concerns over tariffs and an uncertain economic future.
In parallel with the downturn in the leading indicators, the coincident index rose by 1.88 percent to 109.55. The increase is attributed to strong manufacturing output, robust exports, and higher power consumption in businesses. However, the NDC cautions that this growth masks a cooling in consumer demand.
Beyond the Headlines
Despite ongoing manufacturing growth, Taiwanese consumers are wary of making large purchases. A few key factors contributing to this hesitation include: modestly healthy consumer spending, but a stagnant confidence level, economic growth uncertainties, and a shift in consumer behavior favoring recommerce and digital payments.
- Moderate consumer spending growth but stagnant confidence: Although consumer spending reached a record high of 2.896 trillion TWD in Q4 2024 and maintained slight growth into Q1 2025, consumer confidence has gradually dipped—from 71.86 to 68.21 recently—indicating a reduction in willingness to spend heavily or make significant purchases[1].
- Economic growth uncertainties: Taiwan's GDP is projected to expand by approximately 2.9% in 2025, but growth is likely to slow during the second half of the year due to uncertainties such as US tariffs, particularly those related to trade surpluses with the US. This uncertainty casts a pall over consumer optimism, prompting a more cautious approach to spending[4].
- Shift in consumer behavior toward recommerce and digital payments: The recommerce market (resale, refurbishment, rentals) in Taiwan is growing rapidly, with a CAGR of over 14% forecasted through 2029. This growth reflects increasing consumer preference for affordable, secondhand goods rather than expensive new items. Moreover, the expansion of prepaid card and digital wallet usage suggests consumers are moving towards more controlled, smaller-scale spending methods, rather than making big upfront purchases[2, 3].
As Taiwan balances on a stable, yet cautious growth trajectory, the near future will determine whether the green light suggests stabilization or the initiation of a broader slowdown.
Separately, Taiwan's Consumer Confidence Index (CCI) dropped 1.23 points to 63.7 this month, marking its lowest point in over a year. All six subindices saw declines, a rare occurrence usually associated with significant shocks, like the 2018 US-China trade dispute or the onset of the COVID-19 pandemic[5].
"The simultaneous pressures of an appreciating New Taiwan dollar and tariff-related uncertainty impact export sentiment and may eventually affect hiring," said National Central University (NCU) economics professor Dachrahn Wu (吳大任).
Yau Ruey (姚睿), another NCU economics professor, underscored that Taiwan's economy is sensitive to external shocks due to its reliance on small and medium-sized businesses with limited pricing power and little access to currency hedging tools.
Just 870,000 workers (7.5% of the workforce) are employed in high-tech industries, such as electronics, computers, and optics. Meanwhile, over 2 million people work in traditional manufacturing, and more than 7 million, or about 60% of the workforce, are involved in the service sector[6].
- The slowdown in car sales and consumer activity in Taiwan, as reported by the National Development Council (NDC), hints at a potential impact on the broader business sector, especially in retail and wholesale.
- Despite ongoing manufacturing growth, consumer confidence in Taiwan remains stagnant, which could affect the finance sector as consumers may display more cautious spending habits, favoring recommerce and digital payments over large purchases.
