Taiwan manufacturing activity accelerates on expected U.S. tariff cut

Taipei, Feb. 2 (CNA) Taiwan's manufacturing activity expanded for the fourth consecutive month in January after the United States said it would cut tariffs on Taiwanese goods, the Chung-Hua Institution for Economic Research (CIER) said Monday.

Data released by CIER, one of the leading economic think tanks in Taiwan, showed the purchasing managers' index (PMI), which gauges fundamentals in the manufacturing sector, rose 1.9 points from a month earlier to 57.2, the highest since April 2022.

In the service sector, the non-manufacturing index (NMI) also rose 0.7 points from a month earlier to 55.3 in January, and stayed in expansion mode for the 11th straight month, the data indicated.

PMI and NMI readings above 50 indicate expansion, while those below 50 show contraction.

Among the five factors in the January PMI, four moved higher from a month earlier, with the subindexes on new orders, employment, supplier deliveries and inventories up 1.3, 1.4, 2.1 and 4.7 points, respectively, to 58.9, 51.9, 59.7 and 56.9 in January.

The subindex on production, however, moved lower by 0.1 points from a month earlier to 58.5 in January, but stayed in expansion.

In addition, the subindex on the business outlook over the next six months also rose 10.0 points from a month earlier to 61.0 in January, marking the largest expansion pace since March 2022.

CIER President Lien Hsien-ming (連賢明) said the growth in the business outlook factor over the next six months was "better than expected," indicating the removal of uncertainties caused by the U.S. tariff policies was very important to manufacturers.

Echoing Lien, economist Kamhon Kan (簡錦漢) from the Academia Sinica said the U.S.' verbal agreement to cut tariffs on Taiwanese goods, along with a boost from strong global demand for AI devices, is expected to allow Taiwan to have a "very hot year" economically in 2026.

In January, the six major industries in the PMI all improved and were in expansion mode, according to CIER.

As for the NMI, three of the four major factors moved higher with the subindexes on business activities, employment and supplier deliveries up 2.8, 1.3 and 0.8 points, respectively, from a month earlier, to 56.6, 55.3 and 55.4 in January, CIER said.

Bucking the uptrend, the subindex on new orders fell 2.3 points from a month earlier to 53.7 in January, but stayed in expansion, CIER added.

The subindex on the business outlook over the next six months in the service sector also rose 8.3 points from a month earlier to 56.3 in January, according to CIER.

CIER Associate Research Fellow Chen Hsin-hui (陳馨蕙) told reporters that a booming local stock market served as a driver for the higher NMI, saying the financial/insurance industry reported an improving performance in January.