TAIPEI (Taiwan News) — Taiwan’s manufacturing growth slowed in March as Middle East tensions drove up raw material costs, though the sector remained in expansion, Chung-Hua Institution for Economic Research said Wednesday.

The manufacturing purchasing managers’ index fell 3.1 points to 55.4, remaining above the 50 threshold that signals expansion, per CNA. CIER President Lien Hsien-ming (連賢明) said the economy is still growing but at a slower pace.

Rising raw material prices linked to the Middle East conflict have weighed on sentiment, particularly in the chemical sector, per UDN. Lien said the trend reflects moderating expansion rather than a downturn.

CIER data showed uneven performance, with strong demand tied to AI and semiconductors offset by volatility in petrochemical markets. Supplier delivery times and input costs have surged, creating a seller’s market.

Upstream suppliers have begun rationing supply through price hikes, quotas, and shipment delays. This pushed the manufacturing production index into contraction, dropping 11.5 points to 48.3%.

Supply disruptions spread downstream from crude oil and naphtha, driving sharp price increases in plastics and related materials. Some suppliers issued force majeure notices or halted quotations altogether.

Despite the headwinds, Lien said Taiwan’s economy remains resilient, supported by electronics demand. He added that maintaining expansion amid global uncertainty highlights underlying strength.

On inflation, Lien said price-stabilization measures have helped contain short-term pressures, though prolonged conflict could eventually push costs higher. 

Separately, the non-manufacturing index rose 0.9 points to 54.3%, marking 13 consecutive months of expansion. However, the six-month outlook fell to 52.4% as volatility in oil prices and financial markets dragged sentiment down.