Taiwan Manufacturing PMI Slows in October Amid Material Shortages and Inventory Buildup

Table of Contents

• You might want to know
• Main Topic
• Key Insights Table
• Afterwards...

You might want to know

• How can Taiwan’s manufacturing sector continue expanding while facing both material shortages and excess customer inventories?
• Which industries appear best positioned for growth over the next six months?

Main Topic

The Chung-Hua Institution for Economic Research (中華經濟研究院) released Taiwan’s manufacturing Purchasing Managers’ Index (PMI) for October on the 2nd. The headline reading showed that the sector remained in expansion for a 13th consecutive month, as the index stayed above the 50% threshold that separates expansion from contraction. However, the pace of growth eased. The PMI declined by 0.9 percentage points from the previous month to 62.5%.

The result points to continued activity across Taiwan’s manufacturing sector, but it also signals that momentum is becoming less uniform. The research institute said its outlook for the months ahead remained optimistic overall, while emphasizing that sources of growth and operational challenges differ among industries. In other words, a positive aggregate reading does not mean that every manufacturer faces the same conditions, or that all parts of the supply chain are improving at the same rate.

One significant concern is the coexistence of constrained supplies and accumulating inventory. Customer inventories in the manufacturing sector have been judged too high for 2 consecutive months. At the same time, the index for uncompleted orders fell to its slowest expansion pace since January. Supplier delivery times and raw-material prices remained elevated, indicating that companies continue to face pressure in obtaining critical inputs even as some inventories build up.

This combination can be difficult for manufacturers to manage. A company may have customers holding more goods than desired, while still lacking specific components or materials needed to complete production. Excess inventory in one area does not necessarily resolve shortages in another. The institute therefore identified improvement in the supply of critical materials, together with the ability to ship orders smoothly, as important factors that will influence the strength of manufacturing expansion next year.

Despite those risks, manufacturers remained positive about the medium-term outlook. The index measuring expectations for the next six months stayed above 60.0% for 10 consecutive months. In October, it edged up by 0.3 percentage points to 61.7%. This reading suggests that businesses, taken as a whole, continued to anticipate expansion, even as current indicators showed a slower pace and ongoing supply-chain friction.

The five components of the October manufacturing PMI presented a broadly expansionary picture. New orders, production, and employment continued to grow. The supplier delivery-time index remained above 50.0%, while the inventory index also continued to expand. These indicators reflect active demand and production, but the details show that the rate of growth in some areas has moderated.

The new-orders index remained above 60.0%, an indication of continued strong expansion, but its pace slowed for 2 consecutive months. It fell by a further 0.4 percentage points to 63.2%. That easing matters because new orders provide a forward-looking signal for production and workloads. The index remained clearly in expansion, yet the consecutive moderation suggests that manufacturers may need to monitor whether demand stabilizes or continues to lose speed.

The production index declined by 0.9 percentage points to 64.7%, while remaining in expansion for 7 consecutive months. The figure shows that manufacturing output continued to increase, although the monthly movement was lower. Combined with the new-orders reading, it indicates that the sector was still growing in October but that the expansion was not accelerating across all measures.

Industry-level figures further illustrate the differences across the economy. All six major manufacturing industries recorded expansion in October. Ranked by the pace of expansion, the electricity and machinery equipment industry led at 64.5%, followed by the electronics and optical industry at 60.0%, the transportation equipment industry at 56.3%, the chemical, biotechnology, and medical industry at 55.1%, the basic raw-materials industry at 54.9%, and the food and textile industry at 54.8%.

All six industries also recorded expansion in their outlook for the next six months, although the anticipated pace varied substantially. Electricity and machinery equipment ranked first at 75.0%. The chemical, biotechnology, and medical industry followed at 64.1%, ahead of the electronics and optical industry at 61.7%. The basic raw-materials industry registered 60.5%, while the transportation equipment industry stood at 52.6% and the food and textile industry at 52.0%.

The gap between industries is notable. Electricity and machinery equipment recorded the strongest current expansion and the most optimistic six-month outlook. By comparison, transportation equipment and food and textile remained on the expansion side of the threshold in their outlook readings, but their values were closer to 50.0%. The figures do not indicate contraction in any of the six industries; instead, they show that the expected strength of growth is uneven.

Taken together, the October data describe a manufacturing sector that remains broadly resilient but faces practical constraints. Expansion has continued across the overall PMI, its forward-looking outlook, and all six listed industries. At the same time, slower growth in new orders, customer inventories that have been too high for 2 consecutive months, elevated delivery times and raw-material prices, and unresolved shortages of critical materials all warrant attention. The next phase will depend not only on demand, but also on manufacturers’ ability to secure inputs, complete production, and deliver orders on schedule.

Key Insights Table

Afterwards...

The October PMI suggests that Taiwan’s manufacturing sector entered the coming period with a positive, though less forceful, growth trajectory. The outlook will depend in part on whether supplies of critical materials improve and whether manufacturers can turn existing orders into completed shipments without adding to inventory pressures.

For businesses and observers, the key signals to watch are the direction of new orders, production, supplier delivery times, and customer inventories. Continued expansion across all six industries offers a broad foundation, while the different industry readings underline the importance of assessing conditions sector by sector. If supply constraints ease and orders move through production and delivery more smoothly, the sector’s optimistic six-month outlook may gain support; if not, the contrast between expansion and operational strain could remain a defining feature of the manufacturing landscape.