US and Taiwan Manufacturing Surge on AI Demand as China and Brazil Fade

The global manufacturing sector held steady in May, with the JPMorgan/S&P Global PMI unchanged at 52.6, marking ten consecutive months above the 50-point expansion threshold. Yet beneath the surface, a sharp divergence is taking shape. While the United States and Taiwan reported striking accelerations—the US ISM index climbing to 54, its fastest pace in four years, and Taiwan’s PMI soaring to 61.4, the strongest reading since September 2021—China’s official gauge came to a standstill at 50.0 and Brazil abruptly slumped back into contraction at 49.1. This splintering, viewed from Washington to Taipei to São Paulo, reflects a global industrial environment increasingly split between technology-driven hubs and commodity-reliant or consumption-dependent economies.

The US manufacturing upswing in May was powered by a jump in new orders, with that sub-index rising to 56.8, and a firm expansion in production. However, the ISM survey also underscored persistent cost pressures: the prices paid index registered 82.1, down only modestly from 84.6 in April, indicating that raw material inflation remains extreme even if it has eased slightly. Employment in the sector stayed in contractionary territory at 48.6, a reminder that factories are still finding ways to boost output without adding workers. Analysts in New York noted that the robust headline figure nonetheless beat the consensus forecast of 53.2, reinforcing the narrative of a durable—if uneven—US expansion.

Viewed from Taipei, the picture is even more buoyant. Taiwan’s PMI surged 1.1 points to 61.4, its eighth consecutive month of growth, driven overwhelmingly by the electronics and optical industries. The global scramble for artificial intelligence infrastructure is channelling orders through the island’s semiconductor and server supply chains, pushing the sub-index for new orders to levels not seen in years. This AI-fuelled boom stands in stark contrast to the mainland. China’s official NBS manufacturing PMI slipped to exactly 50.0, the dividing line between growth and shrinkage, as the National Bureau of Statistics cited escalating energy costs—linked to Middle East turmoil—as a major drag. Meanwhile, the separate Caixin/S&P Global PMI, which tracks smaller, export-oriented firms, showed a more resilient if slowing 51.8, with overall demand still near a five-year high but new export orders edging lower.

Brazil offers a cautionary tale for emerging markets. After a brief spike to 52.6 in April, the S&P Global manufacturing PMI crashed to 49.1, signalling the sharpest deterioration in orders and output in months. New export orders fell markedly, suggesting that global demand is not uniformly supportive. Pollyanna de Lima of S&P Global described a “difficult” period for Brazilian manufacturers, noting that the initial momentum from earlier in the year had dissipated. Business confidence, measured by FGV’s composite index, remained locked at 90.9, with a small uptick in expectations partially offset by stagnant current conditions.

Looking ahead, the overall global manufacturing expansion appears resilient but dangerously lopsided. S&P Global and JPMorgan warn that the apparent strength may be flattered by customers bringing forward purchases to hedge against further price rises and supply disruptions, which could lead to a payback later in the year. The US and Taiwanese upturns are tethered to the AI investment cycle, which has shown no signs of cooling, but the stubbornly high input costs and sub-50 employment reading in America counsel against complacency. In China, the official PMI’s stall keeps the door open to additional policy stimulus, while Brazil’s reversal highlights the vulnerability of economies that lack a foothold in the global tech supply chain. The second half of 2024 may well test whether the AI-driven industrial surge can sustain the worldwide cycle on its own.