Asia's Factory Activity Buoyed by AI Demand, but Cracks Emerge

By Kimberley Kao

Factory-activity gauges across Asian economies were mixed--as strong demand for artificial-intelligence hardware lended support, while shipping bottlenecks and higher energy costs linked to the Middle East conflict weighed on growth.

Purchasing managers' index data released by S&P Global on Monday showed that Southeast Asian manufacturers saw new orders rise, export powerhouses Taiwan, Japan South Korea faced slower growth after months of strong growth.

Taiwan's manufacturing PMI slid to 54.9 from September's multiyear high of 56.7, as growth in new orders slowed to its weakest pace since March. While demand for AI components remained strong, supplier delivery times lengthened.

"The supply chain story was broadly consistent, as firms continued to face difficulties procuring inputs in a timely manner," said Eleanor Dennison, economist at S&P Global Market Intelligence. "The conflict in the Middle East, freight delays and the added supply chain pressure caused by the current AI wave were key contributing factors here," Dennison said.

Japan's headline reading slipped to a seven-month low as growth in production and new orders slowed and costs rose. Still, Japanese manufacturers continued hiring at a near-decade-high pace to clear backlogs of work.

South Korea also showed signs of weakness, posting its slowest output growth so far this year. Car sales softened and growth in new export orders slowed sharply.

Firms cited weaker demand, raw-material shortages and high costs as factors weighing on activity, said Usamah Bhatti, economist at S&P Global Market Intelligence.

"Positively, confidence in the year-ahead outlook remained robust. Optimism was underpinned by hopes that new product launches and the current semiconductor demand 'supercycle' would continue to support manufacturing growth," Bhatti said.

Meanwhile, China's RatingDog general manufacturing PMI showed that factory activity expanded at a steady pace in October, marking the 11th consecutive month of growth.

China's manufacturing output rose at its fastest pace in six months, supported by solid growth in new orders, according to data released by S&P Global. Demand was driven mainly by new product launches and improved production capabilities, while exporters reported higher sales volumes.

India's export order growth hit a six-month high, driven by strong international demand, while selling-price inflation neared a four-year low.

Elsewhere, Southeast Asia's manufacturing sector showed signs of stronger growth.

Indonesia's manufacturing PMI climbed to 54.0 in October from 52.4 in September, marking its fastest expansion since March 2024. New export orders rose at the fastest pace in the survey's 15-year history, prompting a sharp ramp-up in production, said Bhatti.

Thailand showed similar strength, recording its highest headline PMI reading since the end of 2025. However, backlogs of unfinished work rose at their fastest pace in nearly a year, worsened by labor shortages, including staff resignations and supply-chain constraints.

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

(END) Dow Jones Newswires

November 02, 2026 01:10 ET (06:10 GMT)