Taipei: Taiwan's manufacturing activity saw its fourth consecutive month of expansion in January, following the United States' announcement of forthcoming tariff reductions on Taiwanese goods, as reported by the Chung-Hua Institution for Economic Research (CIER) on Monday.

According to Focus Taiwan, CIER's data revealed that the purchasing managers' index (PMI), which assesses the health of the manufacturing sector, increased by 1.9 points from the previous month, reaching 57.2, the highest since April 2022. In the service sector, the non-manufacturing index (NMI) also experienced growth, climbing 0.7 points to 55.3 in January, marking 11 consecutive months of expansion. PMI and NMI readings above 50 signify expansion, while those below 50 indicate contraction.

Out of the five components of the January PMI, four showed growth from the previous month. Subindexes for new orders, employment, supplier deliveries, and inventories rose by 1.3, 1.4, 2.1, and 4.7 points, respectively, reaching 58.9, 51.9, 59.7, and 56.9 in January. The subindex for production slightly decreased by 0.1 points to 58.5 but remained in expansion territory.

Additionally, the subindex reflecting the business outlook for the next six months surged by 10.0 points to 61.0 in January, marking the fastest expansion since March 2022. CIER President Lien Hsien-ming noted that this growth in business outlook was "better than expected" and emphasized the significance of reduced uncertainties from U.S. tariff policies for manufacturers.

Economist Kamhon Kan from Academia Sinica echoed Lien's sentiments, stating that the U.S.'s verbal agreement to cut tariffs on Taiwanese goods, coupled with robust global demand for AI devices, is anticipated to economically benefit Taiwan significantly in 2026.

In January, all six major industries within the PMI showed improvement and remained in expansion mode, according to CIER. Within the NMI, three out of four major components increased, with subindexes for business activities, employment, and supplier deliveries rising by 2.8, 1.3, and 0.8 points, respectively, to 56.6, 55.3, and 55.4. However, the subindex for new orders dropped by 2.3 points to 53.7 but stayed in expansion, CIER reported.

The subindex for the business outlook over the next six months in the service sector also increased by 8.3 points to 56.3 in January. CIER Associate Research Fellow Chen Hsin-hui attributed the higher NMI to a thriving local stock market, noting that the financial and insurance industries reported improved performance in January.