Taiwan’s manufacturing sector continued its expansion in March, marking the second consecutive month of growth, according to data released by the Chung-Hua Institution for Economic Research (CIER) on Tuesday. The rise in manufacturing activity comes amid global economic uncertainties, with new orders, supplier deliveries, and inventories improving, while production and employment remained in expansion mode. However, concerns over potential U.S. tariffs and geopolitical risks could impact Taiwan’s economic momentum in the coming months.
Taiwan’s Manufacturing Sector Shows Resilience in March
The purchasing managers’ index (PMI) for Taiwan’s manufacturing industry rose slightly by 0.2 points from February to 54.2 in March. A reading above 50 indicates expansion, while a reading below 50 signals contraction.
The service sector also saw a positive turnaround, with the non-manufacturing index (NMI) climbing 4.6 points to 53.8, returning to expansion after a brief contraction in February.
Key Drivers Behind the Manufacturing Expansion
CIER President Lien Hsien-ming (連賢明) attributed the increase in manufacturing activity to buyers rushing to place orders in anticipation of the Trump administration’s potential tariff increases on Taiwan and other Asian economies. However, Lien cautioned that many of these were short-term orders, and it remains uncertain whether this trend will continue in the coming months.
Among the five key sub-indexes in the PMI:
- New Orders: Increased by 2.4 points to 56.8, signaling strong demand.
- Supplier Deliveries: Rose by 2.6 points to 53.4, indicating an improvement in supply chain efficiency.
- Inventories: Climbed by 1.2 points to 53.9, reflecting increased stock levels.
- Production: Declined by 4.1 points to 55.8, but remained in expansion mode.
- Employment: Dropped by 1.0 points to 51.0, showing a slower pace of job growth.
Sector-Wise Performance in Taiwan’s Manufacturing Industry
While the overall manufacturing sector expanded, performance varied across different industries:
✔ Industries with Growth:
- Electronics and optoelectronics – Demand driven by semiconductors and AI development.
- Food and textiles – Benefiting from rising domestic and export orders.
- Basic raw materials – Boosted by increased infrastructure spending.
- Transportation equipment – Recovering due to global trade stabilization.
❌ Industries Facing Challenges:
- Chemical and biotech sector – Struggling with supply chain disruptions and global regulatory changes.
- Electrical and electric equipment – Impacted by rising material costs and slower global demand.
Service Sector Rebounds as Consumer Confidence Improves
The service industry, which had contracted in February, showed signs of recovery in March as the NMI climbed to 53.8. Key sub-indexes recorded increases:
- Business activity: Up 7.1 points to 52.5.
- New orders: Jumped 7.8 points to 54.8.
- Employment: Gained 2.3 points to 53.2.
- Supplier deliveries: Inched up 1.2 points to 54.6.
However, business outlook over the next six months fell to 48.8, signaling growing concerns in the service sector due to stock market fluctuations, rising inflation, and fears of electricity rate hikes.
Taiwan Freezes Electricity Rate Hikes to Support Economy
In an attempt to ease financial pressure on businesses and households, Taiwan’s Ministry of Economic Affairs announced on March 28 that it would freeze power rate hikes. This decision was made amid concerns about the economic recovery and inflationary pressures.
Global Economic Risks: U.S. Tariffs and Market Volatility
CIER economist Chen Hsin-hui (陳馨蕙) warned that the future outlook remains uncertain, as buyers may hold back orders due to concerns over the U.S. trade policies.
Adding to the uncertainty, Academia Sinica economist Kamhon Kan (簡錦漢) pointed out that many Taiwanese manufacturers are worried about reciprocal tariffs from the White House, which are expected to be announced on April 2. The escalating U.S.-China trade tensions could impact Taiwan’s export-dependent economy, particularly its semiconductor and electronics sectors.
FAQs
What does Taiwan’s PMI increase to 54.2 mean?
A PMI of 54.2 means Taiwan’s manufacturing sector is expanding, showing growth in new orders, supplier deliveries, and inventories.
Why did the service sector’s NMI recover to 53.8?
The service industry bounced back due to stronger consumer demand, business activity, and hiring, despite concerns over inflation and stock market volatility.
How are U.S. tariffs affecting Taiwan’s manufacturing sector?
Uncertainty over potential U.S. tariffs on Taiwanese goods has led to short-term rush orders from buyers trying to avoid additional costs.
Which industries performed best in Taiwan’s March PMI report?
Electronics, food and textiles, basic raw materials, and transportation equipment saw the strongest growth in March.
Why did Taiwan freeze electricity rate hikes?
Taiwan’s Ministry of Economic Affairs decided to freeze power rate increases to prevent additional economic strain on businesses and consumers.
