February PMI hits 4-year high, but Middle East war casts shadows: Experts

Taipei, March 13 (CNA) Taiwan's manufacturing activity expanded at its fastest pace in four years in February, despite the shortened work days due to the Lunar New Year holiday, but some experts warned that the war in the Middle East could drive up energy prices and weigh on the economy.

The purchasing managers' index (PMI) for Taiwan's manufacturing sector, a monthly survey of companies, rose 1.3 points from January to 58.5 in February, according to data released by the Chung-Hua Institution for Economic Research (CIER) on Friday.

The indices, heavily weighted by the electronics and optical industry, rose for the fifth consecutive month to their highest level since March 2022, buoyed by the AI boom, according to data released at a press conference.

In the electronics and optical industries, the non-seasonally adjusted new orders index and backlog of orders continued to expand, reaching 56.8 and 59.9, respectively.

Chen Shin-hui (陳馨蕙), a researcher at CIER, said the results came despite a significant reduction in working days to just 14 due to the Lunar New Year holiday occurring in February this year, underscoring the strength of demand in the electronics and optical industries.

The AI wave has boosted high-end electronics and advanced manufacturing, but hurt mature processes as capacity is diverted and raw material costs rise, said Kamhon Kan (簡錦漢) of Academia Sinica, cautioning that the benefits remain uneven.

Looking ahead, some experts warned that global oil prices, which surged past US$100 per barrel due to supply disruptions near the Strait of Hormuz -- a critical oil shipping lane -- amid ongoing Middle East conflicts could slow overall economic growth.

As long as the conflict persists, disrupting oil and natural gas supplies, the consequences could extend well beyond rising prices and falling demand, Kan said.

The spillover could indirectly affect the AI industry, which requires vast amounts of electricity, and weigh on global growth, he added.

Chen said the scale of the economic fallout will hinge on how long the conflict persists.

Taking a more measured view, Jerry Pai (白宗城), a consultant at the Supply Management Institute, Taiwan (SMIT), said long-term impacts of the conflict would be limited, as the semiconductor industry typically holds around six months of inventory.