Taiwan manufacturing growth accelerates in Jan. but costs surge to nearly 4-year high

Production volumes jumped at fastest pace in 11 months.

Taiwan's manufacturing sector picked up speed in January, posting the strongest gains in output and sales in nearly a year, but businesses are grappling with the steepest rise in costs since mid-2022.

The island's manufacturers extended their recovery for a second consecutive month, with the Purchasing Managers' Index from S&P Global rising to 51.7 in January from 50.9 in December. Whilst modest, it marked the strongest improvement in operating conditions in a year.

Production volumes increased at the fastest pace in 11 months as companies adjusted output to meet rising demand. Total new orders expanded solidly, driven by stronger customer interest both domestically and abroad.

Crucially, export sales grew for the first time since March, albeit marginally, with manufacturers reporting strengthening demand from Europe, mainland China, the United States and Japan.

The surge in new business created a backlog of unfinished work, which accumulated at the fastest rate in just over a year. In response, firms increased hiring for the second time in three months, though the pace of job creation remained modest and below the long-term average.

However, the recovery came with a sharp sting. Input costs jumped at the steepest rate since May 2022, driven by higher prices for raw materials, particularly metals. Manufacturers passed on these increases to customers, raising their prices at the fastest clip in more than three and a half years.

The cost pressures prompted cautious inventory management, with companies building stocks of both raw materials and finished goods only marginally, at slower rates than in December.

Purchasing activity, meanwhile, increased at the strongest pace in nearly a year, though insufficient stock holdings at suppliers continued to lengthen delivery times, albeit at the slowest rate in three months.

Despite the momentum, business confidence edged down slightly in January, though optimism remained above the long-run average. Firms expressed hope that customer demand would continue to strengthen.

Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said the survey pointed to a solid start to 2026. "While this suggests a solid start to the year, the survey also pointed to a marked rise in costs," she noted. "It will be important to monitor price trends to see how cost pressures develop."

She added that rising global demand—particularly for AI-related technology and semiconductors—should provide a strong foundation for continued growth throughout 2026.

The survey polled around 400 purchasing managers across Taiwan's manufacturing sector.