Manufacturing and construction PMIs fell back into contraction, with both declines exceeding their averages for the same period over the past five years. Export-oriented companies and high-tech manufacturing remained resilient, but employment and property demand were weak.
The RatingDog manufacturing PMI edged lower, while output reached its highest level since April; companies’ inventory building diverged from trends in employment and selling prices, and the deployment of fiscal funds is key to a broader investment recovery.
As of September 2026, manufacturing investment fell 2.1% year on year, while nominal industrial output grew 8.2%, widening the gap between their growth rates to negative 10.3 percentage points. Morgan Stanley believes slower capacity expansion and profit growth help reduce risks in the industrial and financial systems, although earnings trends vary across industries.
Asia’s average manufacturing PMI for 9–October was higher than in 7–August. Excluding China, new orders were near an eight-month high, and the export recovery spread from technology products to non-technology products; China’s domestic demand remained weak.
Taiwan’s GDP grew 14.4% year over year in the third quarter of 2026, driven jointly by investment, exports and consumption. Citi raised its growth forecasts and expects inflation and financing demand to prompt the central bank to raise rates starting in December.
The Goldman Sachs Analyst Index fell to 49.1, with its new orders component dropping to its lowest since May 2020; however, both manufacturing and services survey trackers edged up, and surveyed companies remained relatively optimistic about capital spending next year.
The ISM manufacturing index rose to 55.5 in October, but the final S&P Global manufacturing PMI was revised lower; construction spending fell 1.9% month over month in September, and Goldman Sachs maintained its fourth-quarter GDP growth tracking estimate.
The RatingDog China Manufacturing PMI fell to 52.0 in October from 52.1 in the previous month, above Goldman Sachs’ forecast. The output index rose slightly, but the new export orders index retreated, and the gap between the input and output price indices continued to point to margin pressure.
The manufacturing PMI fell to 49.3 and the non-manufacturing PMI to 49.7, both below Goldman Sachs forecasts and the Bloomberg survey consensus. Goldman Sachs said seasonal factors explained part of the decline, but activity slowed across manufacturing, services and construction.
Manufacturing and non-manufacturing PMIs both came in below market expectations. Nomura believes the manufacturing decline mainly reflected seasonal factors, but the divergence between production and orders and weakness in construction show that underlying growth momentum remains soft.
Citi’s monthly conference call expects China’s economic growth to slow to 4.2% in 2027, with the growth target potentially lowered to “around 4.5%.” Participants advocated greater fiscal expansion than in Citi’s baseline scenario and expected pressure on real estate investment to outlast the period of home price adjustment.
Taiwan’s GDP grew 14.4% year over year in the third quarter of 2026, exceeding market expectations. Faster capital formation lifted domestic demand’s contribution above that of net exports, and JPMorgan raised its growth forecasts for 2026 and 2027 to 12.7% and 6.1%, respectively.
BofA’s relaunched real-time model estimates that the global economy grew at an annualized quarter-on-quarter rate of 3.7% in the third quarter of 2026, above the 3.4% aggregate forecast from its economists; emerging markets account for the bulk of the gap.
Citi believes long-term memory-chip agreements will make South Korea’s exports and current-account surplus more durable, while employee bonuses, corporate tax payments and shareholder returns will gradually feed through to domestic demand. The bank expects the Bank of Korea to raise rates twice, taking the terminal rate to 3.5%.
US real GDP grew at an annualized quarter-on-quarter rate of 3.4% in the third quarter, with strong consumption and investment in AI-related equipment; Goldman Sachs expects consumption to slow as fiscal stimulus fades, bringing fourth-quarter growth down to 1.8%.
Goldman Sachs’ investment tracker shows China’s real investment grew 1.9% year on year in the third quarter, its slowest pace since the fourth quarter of 2021. The bank cut its full-year augmented fiscal deficit forecast and raised its estimate of the property sector’s drag on growth.
Goldman Sachs' China Current Activity Indicator rose to a month-on-month annualized 5.4% in September, with manufacturing the main driver. Meanwhile, import-implied domestic demand growth slowed, investment and inventory indicators weakened in the third quarter, and fiscal and financial conditions tightened somewhat.
Industrial enterprise profits rose 14.4% year on year in September, up from 4.2% in August. JPMorgan believes AI demand and upstream prices supported profits, but continued weakness in automotive and consumption-related manufacturing prolonged the divergence.
Morgan Stanley expects China’s export share to keep rising and Industry 5.0 to create long-term investment opportunities. But weaker employment transmission, household deleveraging and excess capacity make it difficult for strong exports to translate quickly into broad-based reflation.
Asia’s investment cycle does not rely solely on AI, and exports and balance sheets also provide a buffer against high interest rates. But if oil prices remain above 120 dollars per barrel, central banks raise rates more than expected and AI investment declines, pressure on growth will increase markedly.
