PMI Remains in Expansion but Pace Slows
Chung-Hua Institution for Economic Research on the 2nd released the October manufacturing purchasing managers index at 62.5%, down 0.9 percentage points month-on-month, maintaining expansion for 13 consecutive months, but the pace of expansion slowed. The backlog orders index fell to 53.9%, the slowest pace of expansion since January this year. The supplier delivery time index and raw materials price index stayed at highs of around 70.0%, showing that while demand remained in expansion, manufacturing still faced pressure from lengthening delivery times and rising costs. The China Electric electronics and optics industry PMI fell another 2.6 percentage points to 60.0%, the slowest pace of expansion since March this year, with its backlog orders index down to 53.7%, the slowest pace of expansion since December 2025.
Substrate Bottleneck Drags on AI Server Shipments
CIER President Lien Hsien-ming said the slowdown was mainly due to difficulty in obtaining key raw materials for AI servers, with related assembly concentrated in Taiwan for shipment, but slow procurement of components affecting the overall shipment pace. The bottleneck was previously memory and has now shifted to substrates, with these orders still in place but unable to be completed. CIER Associate Research Fellow Chen Hsin-hui noted that firms remain positive on medium- to long-term AI demand, with order visibility extending to 2027, and some voltage converters and U.S. bids reaching more than 5 years, with shortages very pronounced.
NMI Cools, Too Early to Call a Peak
On the non-manufacturing side, October NMI fell 1.5 percentage points month-on-month, with the pace of expansion slowing but still in expansion. The fourth-quarter domestic demand peak season gradually unfolds, with travel bookings, accommodation and food services, retail, and transportation and warehousing operations continuing to expand, but commercial activity in finance and insurance, wholesale, and information and communications cooled, dragging on overall performance. On whether the simultaneous slowdown in PMI and NMI means the economy has peaked, Lien Hsien-ming said such a conclusion is premature, as both indexes remain in expansion, and one cannot expect plain sailing. He noted recent AI industry swings have been large with wide volatility, making it hard to maintain the same pace of expansion on a high base, with many countries seeing slowing expansion and China falling directly below 50, while Taiwan saw only a slight impact, a wide gap.