Taiwan’s manufacturing sector returned to expansion mode last month for the first time in five months, signaling improving industrial momentum driven by robust global technology demand, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
The purchasing managers’ index climbed to 50.3 from 48.3 in September, moving back above the 50-point threshold that separates expansion from contraction.
“Factory activity showed signs of recovery following a consolidation period in the third quarter, in line with Taiwan’s strengthening export trend,” CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei.
Photo: EPA
New orders and industrial production led the rebound. The new orders gauge rose 3.9 points to 51.1, while the industrial output sub-index jumped 4.5 points to 53.2, marking a return to expansion for both indicators.
Demand linked to artificial intelligence (AI) continued to fuel orders for power systems, energy-related equipment and cooling solutions, as well as advanced semiconductor packaging and high-bandwidth memory systems, the institute said.
The electrical and machinery equipment sector PMI expanded for the second straight month, rising to 51.8, with orders and output in growth territory. Raw-material costs increased sharply, with the price sub-index accelerating above 60 percent.
Supply-side adjustments among upstream producers — including output cuts and production-line reconfigurations — pushed up prices for precious metals, rare-earth materials, memory chips, central processing units and passive components, the institute said.
Raw material price pressures were particularly sharp in the electronics and optical industry, where the input price index surged 6 points to 68.6, the fastest increase since June 2022 and the 10th consecutive month the index has risen, the institute said.
Despite the improvement in activity, manufacturers remained cautious. The six-month business-outlook gauge stayed in contraction at 43.8, although sentiment improved from September with a 3.5-point gain.
Lien warned that it remains too early to conclude that the impact of tariffs has fully passed, saying that traditional industries continue to face significant strain.
Strong performance in AI-related hardware, energy and machinery sectors helped offset some of the drag, he said.
“The robust momentum in the AI industry is indeed underpinning Taiwan’s economic activity,” Lien said.
In services, the non-manufacturing PMI rose to 54.4 from 52.1, supported by strong third-quarter exports, TAIEX rallies and holiday-driven consumer spending, he said.
While manufacturing and services reported business improvements, companies remain largely guarded.
“It is not clear if the economy will sail smoothly and continue to positively surprise this quarter,” Lien said, urging policymakers and companies to remain cautious.
In related news, Bank of America Corp yesterday raised its forecast for Taiwan’s economic performance this year, lifting its GDP projection from 5.2 percent to 7 percent, as the economy is withstanding a local currency appreciation and US tariffs better than anticipated. That would mark Taiwan’s fastest expansion since 2010.
External headwinds appear to be easing after the US and China reached a trade agreement, the bank added.
The improving geopolitical backdrop could create a more favorable environment for Taiwan’s export-driven economy, it said.
The bank also upgraded its GDP forecast for Taiwan next year to 4.5 percent from 2 percent, citing continued AI-related investment momentum and a recovering global tech cycle.
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