Factory activity across Europe and Asia expanded in September as demand, partly supported by the global artificial intelligence spending boom, remained strong despite an energy price shock linked to the Iran war, surveys showed on Thursday.
Rising inflation pressures have increased expectations of further interest-rate hikes from several central banks, including the Federal Reserve and the European Central Bank. The prospect of further rate hikes has also pushed bond yields higher, raising borrowing costs for firms already dealing with higher production expenses.
S&P Global’s Eurozone Manufacturing Purchasing Managers’ Index (PMI) rose to 52.9 in September from 52.7 in August, reaching its highest level since May 2022. The improvement was partly driven by stronger demand for artificial intelligence-related goods.
Growth was broad-based across the bloc, with the Netherlands leading the expansion. Germany, the region’s largest economy, recorded solid growth, while France, Italy and Spain posted more modest expansion.
Iain Simmons, an economist at Oxford Economics, said the PMIs continued to present a stronger picture of Eurozone industry than recent data. He pointed to building underlying momentum over the third quarter and improved industrial support for growth.
Simmons said the strength was concentrated in capital goods, specifically AI and defense equipment, while demand for consumer goods fell amid price pressure. He added that faster cost and selling-price expectations could weigh on the outlook.
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In Asia, manufacturing in Japan, South Korea and Taiwan also improved last month, benefiting from AI optimism.
South Korea recorded its biggest factory activity growth in four months in September, while export demand increased at its fastest pace in 15-1/2 years.
Taiwan’s PMI climbed to 56.7 in September from 54.7 in August. The 50-point level separates expansion from contraction.
China’s factory activity also expanded last month as easing weather disruptions allowed factories to resume operations.
Japan, however, saw its S&P Global PMI decline to a six-month low as output and new orders slowed. New export orders still rose for a ninth consecutive month.
India’s manufacturing sector expanded at its fastest pace in seven months, reviving hiring and lifting business confidence. Elsewhere in Asia, Indonesia and Vietnam recorded expansion, while the Philippines and Malaysia contracted.