Artificial intelligence and semiconductor demand continue to fuel Taiwan’s economic momentum. The Chung-Hua Institution for Economic Research (CIER) reported on July 1, 2026, that its June manufacturing purchasing managers’ index (PMI) dipped slightly to 60.7% from 61.3%, yet maintained an expansionary reading above 50% for the ninth consecutive month. Meanwhile, the non-manufacturing index (NMI) climbed to 59.9% from 58.2%, marking its fastest expansion since December 2021. Hsien-Ming Lien, President of the CIER, stated that the electronics and optical sectors remain the economy’s primary growth engines, with demand showing no immediate signs of cooling and exports staying robust, adding that the impact of higher interest rates and inflation on the tech sector has yet to materialize.
Lien noted that while the June manufacturing PMI slipped 0.7 percentage points from May, overall performance remained quite solid. The recent easing of U.S.-Iran tensions has led to a significant drop in raw material prices. Manufacturers generally reported lower purchasing costs, providing welcome relief for the manufacturing sector.
Shin-Hui Chen, Associate Research Fellow of the Taiwanese Economy Research Division at the CIER, explained that new orders and production in the manufacturing sector continued to grow in June. The slower pace of PMI expansion was primarily due to a moderation in two of the index’s five components: supplier delivery times and inventory levels.
By sector, the electronics and optical industry remains the most critical pillar for manufacturing. Lien stated that although the sector’s PMI fell from over 70% to 66.1%, any reading above 50% indicates ongoing economic expansion. The sector is still expanding at a rapid pace, with no significant cooling in orders or production. While supply chain pressures have eased slightly, lead times for key components remain long, reflecting resilient demand.
The six-month outlook index, which gauges corporate sentiment, dropped 2.6 percentage points to 64.2% in June. However, it maintained an expansionary pace above 60% for the sixth consecutive month. Four of the six major industries reported an expansionary outlook for the next half-year. Ranked by expansion pace, these were electronics and optics (69.9%), electrical and machinery equipment (63.1%), basic materials (55.7%), and chemical, biotechnology, and medical industries (51.1%). Meanwhile, the food and textile (43.5%) and transportation equipment (45.2%) sectors reported contraction.
The chemical, biotechnology, and medical industries were noticeably affected by geopolitics and fluctuating oil prices. Lien noted that during earlier periods of heightened Middle East tensions, some plastic and chemical products saw advance stockpiling. As oil prices have since retreated, new orders and production have contracted for two straight months. Supplier delivery times and raw material price indexes also fell simultaneously, signaling eased cost pressures. While upstream manufacturers maintain a conservative outlook, lower costs have helped midstream, downstream, and pharmaceutical companies shift their outlooks from contraction to neutral or expansionary.
The basic materials sector presented a divergent picture. Chen pointed out that prices for steel, plastics, and aluminum ingots were previously driven up by oil and logistics costs. However, end-user demand remains conservative, significantly slowing the expansion of new orders and production. Conversely, supply chain players related to semiconductors, AI servers, thermal cooling, and power equipment maintain strong outlooks. This optimism drove the overall sector’s six-month outlook to remain in expansion for a fifth consecutive month.
Regarding whether the second half of the year will be impacted by the U.S. Federal Reserve’s interest rate policies and inflation, Lien stated that no demand slowdown is visible yet, at least in the tech sector. He pointed out that Taiwan’s export performance has remained robust throughout the year. Therefore, higher interest rates and inflation have not yet demonstrably impacted the electronics industry or overall exports at this stage.
Source: China Times (July 22, 2026). June Manufacturing PMI Expands for 9th Month! Hsien-Ming Lien: Electronics Exports Remain Strong as Rate and Inflation Impacts Yet to Emerge. China Times. https://www.chinatimes.com/realtimenews/20260701003784-260410/