Taipei: Manufacturing activity in Taiwan improved and returned to expansion in May, reflecting an increase in production and new orders among other factors from a month earlier, the Chung-Hua Institution for Economic Research (CIER) said Monday. The purchasing managers’ index (PMI), which gauges the fundamentals of the manufacturing sector, rose by 2.1 points to 51.0 in May, indicating expansion.

According to Focus Taiwan, the improvement followed a contraction in April when U.S. President Donald Trump announced sweeping “reciprocal” tariffs. The data compiled by CIER showed that major factors in the PMI largely stopped falling, contributing to the expansion. In the service sector, the non-manufacturing index (NMI) also increased by 0.9 points to 51.9 in May, marking the third consecutive month of expansion.

The CIER data revealed that among the major factors of the May PMI, the sub-indexes for production and new orders rose, with production increasing by 3.3 points to 50.8 in expansion, while new orders climbed 1.6 points to 49.1, still in contraction. Sub-indexes on employment and inventories also saw increases, while the sub-index on supplier deliveries experienced a slight decline. The outlook for the next six months showed improvement but remained in contraction.

By industry, sub-indexes for chemical/biotech, electronics/optoelectronics, and electricity and electric equipment industries rose and were in expansion, contrasted by declines in food/textiles, basic raw materials, and transportation equipment industries, which were in contraction.

Trump’s announcement of “reciprocal” tariffs, including a 32 percent import duty on goods from Taiwan, led to a 90-day pause for negotiations. This prompted American buyers to place orders with Taiwanese suppliers, leading to boosted manufacturing activity. CIER President Lien Hsien-ming noted the information and communications industry benefited from increased orders, while old economy industries did not.

Despite the growth, uncertainties due to U.S. tariffs persist, with companies in the manufacturing sector remaining cautious. The outlook for the rest of the year remains uncertain as the rush orders’ longevity is unclear.

The NMI’s sub-indexes for business activity, new orders, and supplier deliveries also showed increases, while employment remained stable. The outlook for the next six months rose, yet remained in contraction, indicating cautious optimism.