Global factory activity boosted by AI spending boom
SPY•Factory activity expanded across Europe and Asia in September, with surveys citing strong demand partly driven by global AI spending. The euro zone manufacturing PMI rose to 52.9, its highest since May 2022, while Taiwan’s reached 56.7 and South Korea’s export demand grew at its fastest pace in 15.5 years.
1. Europe’s factory growth
The euro zone manufacturing PMI rose to 52.9 in September from 52.7 in August, its highest level since May 2022. Growth was broad-based, with the Netherlands leading the expansion; Germany recorded solid growth, while France, Italy and Spain expanded modestly. An economist cited stronger demand for capital goods, particularly AI and defence equipment, while consumer goods demand fell amid price pressure.
2. Asia’s mixed expansion
Factory activity improved in South Korea, Taiwan and Japan, with surveys citing AI-related demand. South Korea’s activity grew at its biggest margin in four months, and export demand rose at its fastest pace in 15.5 years; Taiwan’s PMI increased to 56.7 from 54.7. Japan’s PMI fell to a six-month low, though export orders rose for a ninth consecutive month.
3. Costs remain elevated
The surveys showed factories benefiting from demand even as energy price shocks linked to the Iran war kept inflation elevated. Rising inflation has led several central banks, including the Federal Reserve and European Central Bank, to begin raising interest rates, while higher borrowing costs and production expenses weigh on firms. India’s manufacturing sector expanded at its fastest pace in seven months; activity also expanded in Indonesia and Vietnam, while the Philippines and Malaysia contracted.
