The Chung-Hua Institution for Economic Research (CIER) reported that Taiwan’s Manufacturing Purchasing Managers’ Index (PMI) fell to 55.4% in March 2026, down 3.1 percentage points from February. The Non-Manufacturing Index (NMI) held largely steady at 54.3%. Shin-Hui Chen, Associate Research Fellow in CIER’s Third Research Division (Taiwanese Economy), noted that while demand for AI and semiconductors remains robust, rising oil prices driven by Middle East geopolitical tensions—along with volatility in petrochemical product prices—have prompted a more cautious stance among manufacturers.
AI Demand Provides Support as Traditional Industries Face Cost and Supply Chain Pressures
Associate Research Fellow Shin-Hui Chen said escalating tensions in the Middle East have pushed up raw material costs and introduced greater uncertainty across supply chains. Both the supplier delivery time index and the raw materials price index posted their steepest increases since the second half of 2022, while the manufacturing production sub-index slipped into contraction. Some upstream suppliers have responded by raising prices, rationing output, and delaying shipments—moves that are sharpening the divergence between industries.
Hsien-Ming Lien, President of the CIER, stated that geopolitical conflicts have negatively impacted the petrochemical and energy-related industries. In contrast, the electronics and semiconductor supply chains are thriving due to ongoing demand for AI and high-performance computing. The positive momentum in those sectors has helped maintain an overall Purchasing Managers’ Index (PMI) reading above 50%. The six-month manufacturing outlook index remained at 61.0%, indicating that businesses retain confidence in the near-term trajectory.
Traditional industries, however, are feeling the strain of higher costs and material shortages more acutely. Among the sectors surveyed, chemicals and biomedical held the most cautious outlook, the transportation equipment sector continued to contract, while food and textiles turned more guarded.
Services Sector Maintains Momentum but Outlook Turns Cautious
In the non-manufacturing sector, the NMI has now extended its expansion streak to 13 consecutive months, showcasing sustained demand for domestic services. The new orders sub-index increased to 57.0% in March. However, oil price volatility and financial market turbulence stemming from the Middle East conflict have weighed on business confidence, sending the six-month outlook index sharply lower to 52.4%.
The finance, insurance, information and communications, and transportation sectors have become more cautious about future prospects. The outlook for travel-related services has noticeably softened, indicating that external uncertainties are increasingly impacting expectations in the services sector.
Middle East Conflict’s Economic Impact Seen as Contained, Though Situation Bears Watching
On the broader economic impact, CIER’s President Hsien-Ming Lien said Taiwan’s energy pricing adjustment mechanism provides a near-term buffer, limiting the immediate shock to the economy. Should hostilities prove short-lived, the overall impact should remain manageable. A prolonged conflict, however, would further inflate costs and dampen growth momentum. Factoring in the political pressure U.S. President Donald Trump faces ahead of the midterm elections, Lien said he expects the conflict to begin easing around mid-April.
Author: CIER Editorial Team
Date: April 2, 2026