Taiwan’s manufacturing sector slid back into contraction territory last month, weighed down by expiring US tariff waivers and volatile exchange rates, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
The seasonally adjusted manufacturing purchasing managers’ index (PMI) fell 1.4 points to 49.6, below the expansion threshold of 50, signaling a renewed slowdown in industrial activity.
“The decline reflects rising caution among manufacturers as the suspension of US’ ‘reciprocal’ tariff nears expiration,” CIER vice president Wang Jiann-chyuan (王健全) told a news conference in Taipei.
Photo: Hsu Tzu-ling, Taipei Times
Concerns over shipping reliability and delivery lead times also led firms to trim back production and order volume, he said.
Although the PMI remained close to the neutral 50 mark — indicating a subdued rather than sharply declining environment — key components such as export orders and industrial output weakened, pointing to broader sector-wide hesitation, Wang said.
The CIER said geopolitical tensions, particularly between Israel and Iran, drove crude oil prices higher and ended a two-month downtrend in raw material costs for chemical and biotech producers.
However, tepid end-market demand and cautious inventory strategies limited any significant recovery in procurement activity, it said.
Industry performance was uneven, as the electronics, optics and power equipment sectors remained in expansion mode, but textiles, apparel and transportation-related industries contracted, hampered by shifting supply chains and currency volatility, the CIER said.
Wang flagged the appreciation of the New Taiwan dollar against the US dollar as a growing concern, pointing out that each 1 percent rise in the local currency typically erodes corporate revenue or profits by 0.1 to 0.5 percentage points.
Taiwan Semiconductor Manufacturing Co (台積電), the world’s top contract chipmaker, has reported foreign exchange-related losses — a signal that broader impacts could soon ripple beyond the technology sector, Wang said.
Taiwan’s relatively shallow foreign exchange market, with daily turnover of just US$1 billion to US$2 billion, makes it vulnerable to outsized moves, he said, urging central bank intervention to prevent further disruption — especially amid ongoing US tariff negotiations.
In contrast, the nation’s non-manufacturing sector continued to gain momentum.
The non-manufacturing index rose 2.4 points to 54.3 last month, buoyed by a TAIEX rebound and solid commercial property demand — particularly in emerging hubs such as Taipei’s Beitou-Shilin Technology Park (北投士林科技園區), where Nvidia Corp is looking to open new offices and expand operations.
New high-end housing projects and ongoing data center construction fueled a 23.1-point surge in commercial activity for the construction and real-estate sectors, the CIER said.
Financial services also benefited from stronger investor sentiment, Wang said.
However, retail and hospitality remained in contraction despite a strong NT dollar and reduced outbound travel to Japan.
“The seasonal boost we usually expect has yet to appear,” Wang said, citing subdued tourism demand and lower vehicle sales.
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