Taipei: Taiwan's purchasing managers' index (PMI) experienced a decline from the previous month in March, attributed to ongoing military conflicts in the Middle East, yet it remained within the expansion territory, as reported by the Chung-Hua Institution for Economic Research (CIER) on Wednesday.

According to Focus Taiwan, the data from CIER, a prominent economic think tank in Taiwan, revealed that the March PMI, which evaluates the manufacturing sector's fundamentals, dropped by 3.1 points from February to 55.4.

In contrast, the service sector's nonmanufacturing index (NMI) saw an increase of 0.9 points from the previous month, reaching 54.3 in March, marking its 13th consecutive month in expansion. The readings for both PMI and NMI above 50 signify expansion, while those below 50 indicate contraction.

CIER highlighted that the U.S.-Israel conflict with Iran, which began at the end of February, resulted in a surge in petrochemical-related material prices. Despite this, Taiwan continued to benefit from robust global demand for AI applications. Among the five major factors in the March PMI, three showed weakness, with subindexes for new orders, production, and employment falling by 11.6, 11.5, and 1.7 points, respectively, to 52.1, 48.3, and 51.1.

Conversely, subindexes for supplier deliveries and inventories rose by 6.8 and 2.7 points, respectively, reaching 66.3 and 59.4 in March. Additionally, the business outlook subindex for the next six months decreased by 3.1 points to 61.0.

Despite the decline in the March PMI, all six major industries, including electronics and optoelectronics, basic raw materials, and electricity/machinery equipment, remained in expansion. However, the business outlook for the chemical and biotechnology, and transportation tool industries indicated contraction.

CIER President Lien Hsien-ming expressed that although the conflict has driven up raw material prices, market forecasts suggest the war might conclude by mid-April or early May, potentially limiting its impact on Taiwan's economy. U.S. President Donald Trump mentioned the conflict could end in two to three weeks, while Tehran expressed readiness to resolve the issue.

In the service sector, subindexes for employment and supplier deliveries fell by 4.8 and 1.2 points, respectively, to 51.8 and 54.3 in March. Meanwhile, subindexes for business activities and new orders rose by 4.2 and 5.5 points to 54.2 and 57.0. The business outlook subindex for the next six months dropped by 9.7 points to 52.4 in March.