Taiwan factories fire on all cylinders as stockpiling lifts output to near 5-year high
Production saw its strongest growth since 2021.
Taiwanese manufacturers posted their fastest rise in output for nearly five years in June, as goods producers and their clients alike rushed to build up inventories against continuing disruption from the war in the Middle East.
The seasonally adjusted S&P Global Taiwan Manufacturing Purchasing Managers’ Index slipped to 55.2 in June from a 57-month high of 56.1 in May, but continued to signal a marked improvement in overall business conditions.
The reading ranked amongst the strongest since mid-2021, extending the current run of expansion to seven months.
Output was the sole component to lift the headline figure in June, with the other four sub-indices dragging on the reading. Even so, the latest upturn in Taiwanese manufacturing production was the fastest since July 2021.
Panel members linked the surge to a jump in new orders, as both manufacturers and their customers sought to swell stocks amidst the fallout from the Middle East conflict.
Stocks of finished goods at Taiwanese producers climbed at close to their sharpest pace in fifteen years.
Strong Europe, Japan, and US demand
New business placed with Taiwanese goods producers grew at a slightly gentler, though still robust, pace in June, with stronger demand reported both at home and abroad as clients moved to guard against expected supplier price rises and delays.
New export orders rose at close to their fastest pace since January 2022, with only February 2026 surpassing it, driven by firmer demand from Europe, Japan, and the United States.
Higher production was underpinned by another marked rise in input buying, even as the pace of growth eased back from May.
Firms continued to struggle with vendor performance, though supplier delays, whilst still far worse than the historical norm, eased to their least severe in three months. Longer lead times were largely put down to the Middle East war, resulting shipping disruption and thinner stock levels at vendors.
Input costs rose further as demand for materials continued to outstrip supply, though the rate of inflation cooled to a five-month low. Manufacturers passed on much of the additional expense, pushing selling prices up at one of the steepest rates seen in four and a half years, albeit not quite matching May’s pace.
Employment, meanwhile, edged down for a fourth consecutive month, largely as firms declined to replace staff who left voluntarily, pushing backlogs of work up at one of the fastest rates since early 2022.
Looking ahead, Taiwanese manufacturers grew more confident about the coming year, with optimism rising to its second-highest level since May 2024, buoyed by strong demand for artificial intelligence technology and semiconductors — though uncertainty over the Middle East war tempered some firms’ outlook.
Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, said June’s data pointed to a solid performance of Taiwan’s manufacturing sector, with production growth hitting a near five-year record.
She, however, cautioned that stockpiling activities remain a key driver of output expansion, driven by supply chains and prices remaining under intense pressure due to the Middle East war.
She added that input price inflation easing for the second month in a row, and supply chain performance deteriorating at a slower pace offered tentative signs the pressures may have peaked, though costs continued rising rapidly overall, with the war’s trajectory likely to prove decisive in the months ahead.
