Asia's factory activity feels fading glimmer of AI boom
SMH•Factory activity expanded in October but slowed in China, Japan, South Korea and Taiwan, while growth accelerated in Vietnam, Indonesia and Malaysia. The IMF projects Asia's economy to grow 4.8% in 2026 and 4.4% in 2027, down from 5.0% in 2025.
1. Factory growth slows
Private surveys showed manufacturing activity continued to expand across Asia in October, but slowed in China, Japan, South Korea and Taiwan. Japan's PMI fell to 53.3 from 54.1 in September, South Korea's to 51.3 from 53.9, and Taiwan's to 54.9 from 56.7. China's RatingDog PMI eased to 52.0 from 52.1, while official data showed Chinese factory activity contracted.
2. Costs weigh on demand
The surveys point to strains on export-led economies as elevated fuel and food prices weigh on consumption and business confidence. Dai-ichi Life Research Institute economist Toru Nishihama said strong demand for chips and AI-related goods had masked weakness in Asian and global economies, but that prolonged conflict in the Middle East was making this harder to sustain. Activity expanded faster in Vietnam, Indonesia and Malaysia; India's manufacturing growth slowed as domestic demand and hiring eased, though export orders rose.
3. Growth outlook moderates
The International Monetary Fund projects Asia's economy to grow 4.8% in 2026 and 4.4% in 2027, down from 5.0% in 2025. It cited risks from an Iran war-induced energy shock and a potential correction in the AI boom.
