The local manufacturing sector returned to expansion last month, as the official purchasing managers’ index (PMI) rose 2.1 points to 51.0, driven by a temporary easing in US-China trade tensions, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
The PMI gauges the health of the manufacturing industry, with readings above 50 indicating expansion and those below 50 signaling contraction.
“Firms are not as pessimistic as they were in April, but they remain far from optimistic,” CIER president Lien Hsien-ming (連賢明) said at a news conference.
Photo: CNA
The full impact of US tariff decisions is unlikely to become clear until later this month or next, when the 90-day trade truce expires, he added.
However, the temporary pause on new tariffs has prompted companies to accelerate shipments in anticipation of possible new duties, a move that could skew short-term production and order data, he said.
The data showed that manufacturers in the electronics, power equipment and specialty chemical sectors reported improved business conditions, while the automotive sector continued to lag behind.
Despite a rise in rush orders, firms are skeptical the orders would last long, Lien said.
He also said that US President Donald Trump’s potential introduction of differentiated tariffs on advanced versus mature chips could pose a greater threat to Taiwan’s semiconductor exports.
In addition, Trump’s “reciprocal” tariffs are currently facing legal challenges in the US, adding to market uncertainty. As a result, the PMI’s reading for the six-month business outlook remained in contraction territory for the second consecutive month, he said.
Firms indicated that concerns over order visibility are unlikely to ease until the trade truce expires at about July 9, Lien said.
Jerry Pai (白宗城), an advisor at the Supply Management Institute in Taiwan (中華採購與供應管理協會), said that last month’s rebound in the PMI was driven more by supply chain repositioning than demand recovery.
In the services sector, Taiwan’s nonmanufacturing index edged up 0.9 points to 51.9 last month, marking the third consecutive month of expansion, the CIER said.
The increase was supported by a combination of seasonal spending around Mother’s Day and the Dragon Boat Festival holiday, as well as a rebound on the local stock market, it added.
“Despite the short-term resilience, the broader business mood remains cautious,” Lien said, adding that the six-month business barometer rose 10.9 points from the previous month to 40.0 — still firmly in contraction territory.
Much would depend on US tariff decisions and global demand signals over the next couple of months, Lien said.
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