Manufacturing slows in June amid tariff concerns: CIER

Taipei, July 1 (CNA) Manufacturing activity in Taiwan weakened and fell into contraction mode in June amid tariff concerns, the Chung-Hua Institution for Economic Research (CIER) said Tuesday.

After just one month of expansion in May, Taiwan's purchasing managers' index (PMI), which reflects manufacturers' view on market conditions, dropped by 1.4 to 49.6 in June.

Meanwhile, the non-manufacturing index (NMI), the services-sector counterpart to the PMI, rose by 2.4 points to 54.3, marking the fourth consecutive month of expansion, according to CIER data.

Index readings above 50 indicate expansion, while those below 50 signify contraction.

Among the component parts of the PMI, the sub-indexes for new orders and employment have been in contraction since May, while the production sub-index fell from expansion into contraction.

Meanwhile, the sub-indexes for inventories and supplier deliveries continued to indicate expansion, although inventory growth slowed in June.

The sub-index measuring the six-month outlook dropped 1.1 points to 39.8, marking a third consecutive month of contraction, CIER data indicated.

Wang Jiann-chyuan (王健全), vice president of the Taipei-based think tank, explained that the looming deadline in the pause on the United State's "reciprocal tariffs," shifts in supply chains and the appreciation of the Taiwan dollar all contributed to operational uncertainty for businesses.

Pai Tsung-cheng (白宗城), head of the Supply Management Institute said that some businesses received too many orders and therefore suffered substantial exchange loss as the Taiwan dollar appreciated.

However, Taiwanese firms are resilient and are actively assessing exchange risks to prepare for their next moves, he said.

Academia Sinica economist Kamhon Kan (簡錦漢) said that most industries are expecting a contraction, as advance orders largely came to an end in May.

However, he also noted that demand related to artificial intelligence (AI) remains strong and may flourish until next year.

Meanwhile, although the NMI has risen and remains in expansion, the outlook over the next six months for the service sector only increased by 0.3 to 40.3, marking the fourth consecutive month of contraction for the sub-index, according to CIER.

This reflects the fact that some industries are facing a slow peak season, unclear macroeconomic developments, and reserved consumption, CIER said.