Private surveys released Tuesday indicated that factory activity in China, Japan, and South Korea expanded in August, supported by global demand for artificial intelligence (AI) hardware. The growth in these export-reliant economies occurred despite rising costs and uncertainty linked to the conflict in the Middle East.
The data follows a period of global investment in semiconductors and computer hardware for AI development. While the private surveys showed expansion, an official government survey in China indicated that manufacturing activity improved but remained in contraction territory.
In China, the RatingDog General Manufacturing Purchasing Managers' Index (PMI) rose to 51.5 in August from 50.9 in July, exceeding the 50.0 mark that separates growth from contraction. Japan's manufacturing PMI reached 54.9, its highest level since April, while South Korea recorded its ninth consecutive month of expansion with a reading of 52.3. Conversely, India's factory growth slowed to a five-year low, resulting in the first reported job losses in that sector in more than two years.
For businesses and consumers, this trend influences the availability of electronics and AI-integrated products. While manufacturing sectors in Japan and South Korea are seeing increased business—Japan saw new business grow at its fastest pace since January 2018—workers in India are facing a different reality. The slowdown there, described by S&P Global Market Intelligence as a five-year low, resulted in the first net job reductions in the sector in more than two years.
The effects extend to national fiscal policies and global supply chains. South Korea has proposed a record $597 billion budget for 2027 to supercharge AI investment. However, the dip in Indonesia's PMI to 49.8 and the job losses in India indicate that the recovery is not uniform across all markets. Observers will look to upcoming trade data and the potential impact of a threatened strike by Micron's Taiwan unions over bonus disputes to see if supply chain momentum continues.