Factory activity across Asia expanded in September, driven by surging global demand for chips and artificial intelligence-related goods, according to private surveys released on October 1. Export powerhouses South Korea, Taiwan, and Japan saw manufacturing growth that offered relief to policymakers tracking energy cost pressures stemming from the US-Israeli war on Iran.
South Korea Sees Fastest Manufacturing Expansion in Four Months
South Korea led the regional uptick, recording factory activity growth at its biggest margin in four months. The purchasing managers’ index (PMI) published by S&P Global rose to 53.9 in September, up from 52.3 in August. The index has now remained above the 50-point mark separating expansion from contraction for 10 consecutive months.
Export demand in the country grew at its fastest pace in 15 and a half years. Usamah Bhatti, an economist at S&P Global Market Intelligence, noted that both new orders and production growth hit their highest points in around five and a half years. Bhatti attributed these expansions to the combined strength of the semiconductor and automotive sectors.
Taiwan and Japan Benefit from Semiconductor Boom
Taiwan also reaped the rewards of the global artificial intelligence boom, pushing its S&P Global PMI to 56.7 in September from 54.7 in August. Meanwhile, Japan’s S&P Global PMI stood at 54.1, easing from 54.9 in August and marking the weakest pace of expansion in six months as output and new orders slowed.
Despite Japan’s slight slowdown, overseas demand remained resilient. New export orders for Japanese goods rose for the ninth straight month, propelled by strong demand across Asia and improved sales to the United States. However, cost pressures persisted in Japan, with firms continuing to raise selling prices at one of the sharpest rates recorded since late 2022.
Patchy Growth Across Other Asian Economies
Outside of the major tech export hubs, manufacturing performance across the rest of Asia remained uneven during September. Private surveys showed that factory activity expanded in Indonesia and Vietnam, while conditions deteriorated in the Philippines and Malaysia, where manufacturing sectors contracted.
These private surveys followed separate data showing that China’s factory activity also expanded last month. That mainland recovery was aided by easing weather disruptions that allowed factories to resume normal operations.
Purchasing managers index readings above fifty indicate manufacturing expansion
A Purchasing Managers’ Index (PMI) reading above 50 indicates an expansion in manufacturing activity compared to the previous month, while a reading below 50 signals a contraction.
Energy Costs Cloud Regional Outlook
While the artificial intelligence boom continues to fill order books for semiconductor and electronics manufacturers, broader economic risks remain. A renewed rise in energy prices has clouded the global economic outlook, introducing nagging cost pressures that are closely monitored by policymakers. These pressures are linked to the US-Israeli war on Iran, threatening profit margins even as factories run at higher capacities to meet tech-sector demand.
What drove the expansion of factory activity in Asia during September?
What drove the expansion of factory activity in Asia during September?
The expansion was primarily driven by solid demand for microchips and artificial intelligence-related goods, particularly benefiting major export hubs like South Korea, Taiwan, and Japan.
How did South Korea’s PMI perform in September?
South Korea’s PMI rose to 53.9 in September, up from 52.3 in August, marking its highest level since May and staying in expansion territory for the tenth consecutive month.
What are the main economic risks highlighted in the surveys?
Policymakers remain concerned about nagging cost pressures and a renewed rise in energy prices driven by the US-Israeli war on Iran, which threatens to squeeze manufacturing margins.
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