April manufacturing business climate remains 'green' despite Middle East tensions, score dips slightly

Despite strong demand for artificial intelligence (AI), the conflict in the Middle East has disrupted some manufacturers' inventory preparations, affecting related indicators. The Taiwan Institute of Economic Research (TIER) announced today that the manufacturing business climate signal for April remained 'green,' indicating a 'stable' status, though the score dipped slightly. TIER believes that while the manufacturing sector will remain stable in the short term, variables such as geopolitical risks and international energy price fluctuations must be monitored in the medium to long term. TIER analyzed that while the year-on-year increase in export prices in April boosted sales price indicators, the growth rates of imports, exports, foreign orders, and industrial production indices were lower than in March, causing the business climate signal value to decline slightly. Demand for AI, high-performance computing, and cloud services continues to drive the performance of electronics and machinery industries, serving as a key pillar for Taiwan's manufacturing sector. However, some traditional industries are relatively weak due to energy price fluctuations, uneven recovery in terminal demand, and international market competition. Looking at specific sectors, the plastics and rubber industry saw its signal turn from green to 'yellow-red' (rising) due to rising international oil prices and increased demand from Japan and ASEAN markets. In the electronics components sector, while AI and high-performance computing applications remain active, growth rates narrowed compared to March as some terminal customers adjusted inventories, causing the signal to retreat from 'red' (boom) to 'yellow-red.' TIER noted that, looking ahead, global cloud service providers are expected to maintain double-digit growth in capital expenditures through 2026, which will support the growth of the electronics and machinery industries. However, TIER warned that geopolitical risks in the Middle East, energy prices, and shipping cost fluctuations could continue to disrupt global supply chains, while U.S. trade policies and uneven global demand recovery could also affect corporate investment and order momentum.