Asia's factory activity feels the fading glimmer of AI boom
SPY•Factory activity expanded in October but slowed in China, Japan, South Korea and Taiwan, as elevated fuel and food prices weighed on consumption and business confidence. The IMF expects 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 factory activity continued to expand in October, but growth slowed in China, Japan, South Korea and Taiwan. Japan's PMI eased to 53.3 from 54.1, South Korea's fell to 51.3 from 53.9, and Taiwan's declined to 54.9 from 56.7. China's RatingDog PMI dipped to 52.0 from 52.1, while official data showed factory activity contracted.
2. Inflation weighs on demand
The article attributed pressure on Asian economies to elevated fuel and food prices amid the prolonged Middle East conflict, which have weighed on consumption and business confidence. It also cited intensifying price competition from China as a strain on exporters such as Japan and South Korea. Factory activity expanded faster in Vietnam, Indonesia and Malaysia, while India's growth slowed but stronger export orders cushioned the decline.
3. AI risks and outlook
The IMF projected Asian economic growth of 4.8% in 2026 and 4.4% in 2027, compared with 5.0% in 2025, and warned of risks from an energy shock and a potential correction in the AI boom. Japan's central bank said a substantial decline in AI growth expectations could tighten global financial conditions and hurt Japan through lower exports and production.
