(Bloomberg) -- Taiwan’s economy grew more than expected in the third quarter, a sign the chips the archipelago makes remain in high demand due to the AI boom.
Gross domestic product expanded by 3.97% on-year in the period, the statistics bureau in Taipei said in a statement on Thursday. That outpaced the 3.4% median estimate in a Bloomberg survey of economists. Consumer spending rose 1.92%, the lowest figure since March 2022.
Demand for AI tech and information communication products remained strong, the bureau said, adding that salary increases and wealth effects of the rising stock market also helped in the quarter.
Taiwan has benefited from global demand for the semiconductors and servers that its companies make, tech that is crucial to advances in artificial intelligence. Earlier this month, shares of the archipelago’s biggest company, Taiwan Semiconductor Manufacturing Co., hit a record high after the chipmaker topped quarterly estimates and raised its target for 2024 revenue growth, easing concern about the sustainability of an AI hardware boom.
“It is perhaps not surprising to see that exports and investments are still in the driving seat led by AI demand,” said Michelle Lam, Greater China economist at Societe Generale SA. “There seems to be some softer momentum in consumption than we have expected but it’s still healthy.”
The main chip manufacturer for Nvidia Corp. and Apple Inc. now expects sales to climb roughly 30% in US dollar terms this year, up from previous projections for an increase in the mid-20% range.
Officials in Taiwan have warned that economic growth would slow as 2024 winds down, partly due to smaller increases in exports. Previous data showed that exports rose 4.5% on-year in September, well short of the 10.9% gain that economists expected.
While shipments of AI-related products remained “robust,” the government had said, those for minerals, chemicals and plastics declined amid overcapacity in petrochemical products globally.
Last month, the central bank increased the amount of funds banks must hold in reserve to rein in the sizzling property market, while keeping its benchmark interest rate at the highest level in 16 years. That was partly due to inflation that while low by international standards has been eating away at wage gains.
--With assistance from Miaojung Lin.
(Updates with consumer spending data and more details.)
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