Asia PMIs Signal Solid Start for Manufacturers in 2026

By Kimberley Kao

Asian manufacturers started the year on a strong note, with factory activity ticking up in major exporters like Japan and South Korea, and business sentiment brightening.

S&P Global's purchasing managers indexes showed continued improvement in orders and output, despite continued U.S. tariff policy uncertainty and rising price pressures.

"The January manufacturing PMI readings for Asian economies remain consistent with generally steady growth in manufacturing," Shivaan Tandon at Capital Economics said in a note.

Though the surveys haven't been a great guide to hard activity data for some economies, Tandon expects much of Asia to keep benefiting from a shift in U.S. demand away from China, and strong global demand for artificial-intelligence related exports.

The PMIs for South Korea and Taiwan--top beneficiaries of the AI boom--both signaled sharp increases in new orders and output in the first month of the year.

In Taiwan, export sales rose for the first time in nearly a year, said Annabel Fiddes at S&P Global Market Intelligence.

Companies in Taiwan widely reported improved demand from clients at home and overseas, a trend seen in the Korea survey data too.

New export business volumes rose at the fastest clip since April 2021, and Korean firms expect product lines, diversification and favorable conditions in key markets like autos and semiconductors to underpin growth in 2026, said Trevor Balchin, economics director at S&P Global Market Intelligence.

The PMI for Japan pointed to a firming recovery as well.

"Japan's manufacturing industry propelled itself back into growth territory at the start of 2026, with firms signalling the strongest upturns in output and new orders for nearly four years," said Fiddes.

China's factory activity also accelerated at the start of 2026, the RatingDog PMI compiled by S&P Global showed.

Notably, new export orders returned to growth, buoyed by increased demand from Southeast Asia and other overseas markets, said Yao Yu, founder at RatingDog.

However, the Asia manufacturing upswing was accompanied by rising inflationary pressures, which remain a key concern for businesses.

As companies keep an eye on costs, it will be important to monitor price trends and their impact on demand, recruitment and inventory decisions, the S&P economists said.

Higher input costs could be a particular pain point in China, where growth momentum is more fragile. Business confidence among the country's manufacturers fell to a nine-month low in part over concerns around costs, the data showed.

"If cost pressures persist while demand recovery is limited, profit margins will remain under pressure," said Yu.

For economies like South Korea and Taiwan, continued AI tailwinds could help offset the cost pressure.

Overall, the near-term outlook for most of Asia's export-driven manufacturing sectors remains favorable, said Tandon at Capital Economics.

Write to Kimberley Kao at kimberley.kao@wsj.com

(END) Dow Jones Newswires

February 01, 2026 23:41 ET (04:41 GMT)