June PMI Expands for 9th Month, CIER: AI Boom to Help Exports Exceed $1 Trillion

(CNA, reporter Pan Zih-yu, Taipei, July 1) The Chung-Hua Institution for Economic Research (CIER) announced today that the seasonally adjusted manufacturing Purchasing Managers' Index (PMI) for June slightly declined by 0.7 percentage points to 60.7%, marking the ninth consecutive month of expansion. CIER President Lien Hsien-ming stated that despite the slight decrease, the absolute value remains at a relatively high level; if the AI boom continues, this year's export volume is expected to surpass the $1 trillion mark.

The seasonally adjusted PMI for June fell to 60.7%. The main reasons for the slowdown in expansion were the slower pace of expansion in the delivery times and inventory indices among the five component indicators. Lien Hsien-ming pointed out that although the index has fallen, a PMI above 50% indicates expansion, and it is still at a considerably high level, with expansion still proceeding rapidly.

Lien Hsien-ming said that demand from the AI supply chain is truly very strong, and if this trend continues, "exports this year could really break the $1 trillion mark," a scenario never seen before.

Chien Chin-han, a research fellow at the Institute of Economics, Academia Sinica, agreed that there were no major changes in the manufacturing trend in June, continuing the AI wave. However, he noted one development worth paying attention to: "raw materials for electronic products are all rising."

Lien Hsien-ming added that in the past, production and shipments were generally based on existing orders. Now, due to factors such as production capacity constraints, it has evolved into requiring long-term contracts or at least half of the payment upfront before goods are allocated.

In June, the unadjusted PMI for all six major industries expanded. Ranked by expansion speed, they were: Electronic and Optical Products (66.1%), Power and Mechanical Equipment (60.2%), Transportation Equipment (57.6%), Food and Textiles (57.0%), Basic Raw Materials (52.7%), and Chemicals and Biotechnology Healthcare (50.9%).

CIER indicated that the PMI index for the Electronic and Optical Products industry in June remained above 60% for expansion. However, manufacturers have reported that supply chain pressure has been high in previous periods. Delivery times for key components such as passive and active components, PCBs, and optical materials continue to lengthen. Even with willingness to pay higher prices, sufficient materials may not be obtainable, leading to a gap between order volume and actual production capacity.

On the other hand, some semiconductor and key electronic component manufacturers have already raised prices in the first half of the year and plan further increases in the second half. If end customers cannot fully absorb the costs, manufacturers may face pressure to adjust product portfolios, lower specifications, or discontinue certain models. The future outlook index for the Electronic and Optical Products industry fell by 3.9 percentage points from its fastest expansion rate since May 2021 (73.8%) in May, to 69.9%.

Chien Chin-han believes that the issue of "AI Inflation" must be monitored. If strong AI demand leads to a general increase in raw material prices, consumers will have to bear the cost of the AI boom. He has heard that the iPhone 18 might see a price increase of up to 30%.

However, Chien Chin-han stated that while AI inflation might be a future challenge, it is unlikely to have a significant impact on overall prices, as consumers do not purchase electronic products daily.

CIER also released the unadjusted Non-Manufacturing Composite Index (NMI) for June today, which rose by 1.7 percentage points to 59.9%, the fastest expansion rate since December 2021. The future outlook index for the next six months surged to its fastest expansion rate since June 2024.

CIER pointed out that the improvement in managers' future outlook stems from two main aspects. Firstly, traditional domestic demand industries are benefiting from the summer and holiday seasons. Additionally, peace talks between the US and Iran and the easing of supply chain risks have reduced some businesses' concerns about energy prices, logistics costs, and supply chain disruptions, thereby improving the confidence of non-manufacturing managers in the future operating environment.

Secondly, the spillover effect of semiconductor and AI demand continues to spread to the non-manufacturing sector. Price increases for semiconductors and key electronic components, along with sustained demand for AI servers and high-end manufacturing, have not only boosted demand or inquiries in construction and real estate, wholesale, logistics, and information and communication services but also supported confidence in the financial and insurance sectors through stock market performance and active capital markets. (Editor: Chang Chun-mao) 1150701)