Factory activity bounced in August as AI fuelled Asian expansion

Factory activity bounced in August as AI fuelled Asian expansion By Jonathan Cable and Leika Kihara Tue, September 1, 2026 at 11:59 AM GMT+2 3 min read By Jonathan Cable and Leika Kihara TOKYO/LONDON, Sept 1 (Reuters) - Global factory activity was humming last month as surging demand for AI hardware kept Asian factories busy while new orders in Europe bounced higher, brightening prospects even ‌as the prolonged U. S. -Iran war fuels uncertainty, surveys showed on Tuesday.

Growth in the euro zone's manufacturing sector hit its ‌fastest pace in more than four years in August. But in Britain, outside the European Union, activity growth slowed slightly but factories hired workers at the ​fastest pace in more than two years due to rising production requirements. Germany also saw factory growth hit a more than four-year high, while France contributed to the overall expansion.

On the other hand, Italy saw its first contraction since January and Spain was also in negative territory. S&P Global's Eurozone Manufacturing Purchasing Managers' Index (PMI) rose to 52. 7 in August from 51.

9 in July, its highest reading since May 2022 ‌but just shy of a preliminary estimate of ⁠52. 8. PMI readings above 50.

0 indicate growth in activity. "The resilience story is still going on," said Carsten Brzeski at ING. "It still reflects the fact European manufacturing companies, at least some of them, benefited from ⁠the fact Asian competitors are hurt more by the closure of the Strait of Hormuz.

" Efforts by mediators including Qatar and Oman to broker a deal to reopen the key shipping route, which carried about a fifth of global oil supplies before the war erupted in late February, ​have so ​far proven inconclusive. Germany's PMI came in at 54. 3 and France's rose ​to 51.

1 from a sub-50 number in July. The ‌British factory PMI slipped to 51. 7.

AI ASIA It was an upbeat picture in Asia as China, Japan and South Korea saw factory activity expand in August on solid demand for chips, computers and other AI-related products, helping offset mounting cost pressures from the conflict. China's RatingDog China General Manufacturing PMI, compiled by S&P Global, rose to 51. 5 in August from 50.

9, beating analysts' estimate of 51 in a Reuters poll. The reading reinforced signs AI-led demand is helping stabilise parts of China's industrial sector, although an official survey showed overall ‌factory activity remained in contraction, underscoring the fragility of the broader recovery. Japan's ​manufacturing industry gathered momentum as new business grew at the fastest pace ​since January 2018 on solid demand for semiconductors and AI-related ​products.

South Korea saw activity expand for a ninth straight month due to robust export demand. Story Continues The S&P Global ‌Japan Manufacturing PMI rose to 54. 9 from 54.

5, its ​highest since April and marking ​the eighth consecutive month of expansion, the survey showed. "Overall, the sector looks well placed to sustain its strong performance, particularly given demand linked to AI-related sectors," said Annabel Fiddes, economics associate director at S&P Global Market Intelligence. South Korea's PMI ​eased to 52.

3 from 53. 1, but was still ‌above the 50 mark for a ninth month. The expansion was driven by exports, which rose 68.

7% in August ​from a year earlier to expand for the 15th straight month, separate data showed on Tuesday.