Key facts
- China's manufacturing PMI rose to 51.5 in August, up from 50.9 in July and surpassing estimates.
- Growth in China's manufacturing sector was driven by faster expansion in output, new orders, and exports.
- Japan's manufacturing PMI increased to 54.9 in August, its highest level since April.
- South Korea's PMI eased to 52.3 but remained in expansion territory for the ninth straight month.
- Demand for AI-related products like chips and computers fueled factory activity across the region.
Factory activity across Asia expanded in August, buoyed by strong demand for artificial intelligence (AI) hardware, according to private surveys. This surge in demand for chips, computers, and other AI-related products helped to brighten prospects for export-reliant economies, even as global uncertainties persist.
China's manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 51.5 in August from 50.9 in July, surpassing analysts' estimates and indicating continued growth. This reading suggests that AI-driven demand is stabilizing parts of China's industrial sector, though overall factory activity remains fragile.
Japan's manufacturing sector also showed momentum, with new business growing at the fastest pace since January 2018, largely due to demand for semiconductors and AI products. Japan's PMI reached 54.9, its highest level since April. South Korea experienced its ninth consecutive month of manufacturing expansion, with exports rising significantly, driven by the AI and semiconductor supercycle.
Other countries in the region also saw factory activity expand, including Taiwan, Malaysia, and the Philippines. However, Indonesia's manufacturing index dipped back into contraction territory. The robust export demand in South Korea is an encouraging sign for firms benefiting from the current AI and semiconductor boom.