Taiwan's April PMI Rises to 55.3, a New High, Manufacturing Continues to Expand
AI summary card
Taiwan's April PMI Rises to 55.3, a New High, Manufacturing Continues to Expand
J.P. Morgan's report indicates that Taiwan's manufacturing PMI rose to 55.3 in April, the highest level since 2022, showing continued expansion in manufacturing, but supply chain pressures and rising costs due to Middle East conflicts require attention.
- April PMI reached 55.3, exceeding expectations and hitting a new high since 2022
- Output index rose to 54.8, new orders index reached 57.0
- Input price index surged to 82.7, a five-year high
- Middle East conflicts exacerbate supply chain pressures, non-tech industries face greater impact
- Tech industry supports Taiwan's export growth, but rising energy costs threaten profits
Report interpretation
Overview
J.P. Morgan's research report notes that Taiwan's manufacturing PMI rose to 55.3 in April, indicating continued expansion in manufacturing. Both output and new orders indices climbed, but supply chain pressures and rising costs emerged as key risks. Middle East conflicts may exacerbate energy supply tensions, with non-tech industries being more significantly affected.
Core views
The report highlights that Taiwan's manufacturing PMI recorded 55.3 in April, up significantly from 53.3 in March and exceeding expectations of 52.5. Major sub-indices showed overall improvement: the output index rose from 52.8 to 54.8, the new orders index increased from 54.8 to 57.0, and the new export orders index edged up to 54.1. S&P Global data showed that increased purchasing volumes (57.6) and order backlogs (57.4) supported growth. However, supplier delivery times extended to their slowest since April 2022, the input price index jumped to 82.7 (a five-year high), and the output price index rose to 66.0 (a four-year high). The report suggests that the AI semiconductor cycle continues to drive growth in the tech sector, but Middle East conflicts have led to tight supplies of energy and raw materials, putting greater pressure on non-tech industries. Several petrochemical companies have declared force majeure due to raw material supply disruptions, and further escalation could intensify global inflationary pressures.
Analysis framework
The report uses a supply-demand framework to analyze Taiwan's manufacturing PMI trends, assessing the impact of geopolitical conflicts through industry chain transmission mechanisms. By breaking down PMI sub-indices (output, orders, prices), it evaluates supply-demand dynamics and compares historical data (such as peaks since 2022) to assess growth sustainability. It employs a cost transmission model to analyze the impact of Middle East conflicts on energy prices and uses industry concentration analysis to differentiate risk exposures between tech and non-tech sectors.
Methodology notes
Analyzing PMI sub-indices (output, orders, inventory) to assess manufacturing supply-demand conditions
The report dissects PMI sub-indices such as output, new orders, and export orders to evaluate Taiwan's manufacturing supply-demand conditions. When all PMI sub-indices are above 50, it indicates an expansion cycle.
Incorporating geopolitical conflicts into cyclical analysis to assess inflation and growth risks
The report treats Middle East conflicts as potential inflation disruptors and evaluates their impact on energy prices and global demand in conjunction with capacity cycles, aligning with Merrill Lynch Investment Clock's approach to macro risks.
Key data
- Manufacturing PMI55.3MoM +2pt, above expectations of 52.5, a new high since 2022
- Output Index54.8MoM +2pt, showing continued expansion in production activity
- Input Price Index82.7MoM +significant, a five-year high
- Future Output Index56.0MoM -3.5pt, indicating cautious optimism among firms
Impact & implications
The report suggests that Taiwan's tech sector (especially semiconductors) will continue to lead export growth, but energy-intensive industries (e.g., petrochemicals) face raw material shortages and cost pressures. If Middle East conflicts escalate further, they could impact non-tech sector profitability through supply chain and inflation channels, recommending attention to tech stocks' resilience and non-tech sector risks.
Risks
- Escalation of Middle East conflicts leading to energy supply shortages
- Persistent rise in input costs squeezing corporate profits
- Rebound in global inflationary pressures
- Production disruption risks in non-tech industries
What to watch
- Impact of the Fed's June rate hike path on Taiwan's exports
- Changes in capital expenditures by semiconductor manufacturers like TSMC
- Impact of Middle East tensions on Brent crude prices
- Changes in capacity utilization rates of Taiwan's petrochemical firms