Global factory activity surges in July on AI demand

Manufacturing activity across several major economies expanded robustly in July, with artificial intelligence-related demand and recovering export orders powering gains from Asia to Europe in data released Monday.

Taiwan's purchasing managers' index rose 0.8 points to 61.5, its highest reading since August 2021, as the island's factories benefited from surging global demand for AI applications, according to the Chung-Hua Institution for Economic Research. New orders and production — two of the five major PMI components — climbed 2.9 and 4.0 points respectively to 63.3 and 62.7, while the six-month business outlook index held above 60 for a seventh straight month.focustaiwan

In Singapore, factory activity expanded for a 12th consecutive month, with the PMI edging up to 51.4 from 51.3 in June, the Straits Times reported. The electronics sector, which accounts for 40 percent of the city-state's manufacturing output, saw its PMI rise to 52.4, marking 14 months of unbroken growth fueled by semiconductor demand from major US hyperscalers planning more than $700 billion in AI-related capital expenditure in 2026.straitstimes

Europe Joins the Expansion

Germany's manufacturing PMI rose to 52.2 in July from 50.3 in June, matching a joint four-year high first set in March, Reuters reported. Output grew at its fastest pace since February 2022, while export sales rebounded to their strongest level in the same period. "Germany's manufacturing sector made an impressive start to the third quarter, with a notable improvement in export sales helping drive the strongest production growth in nearly four-and-a-half years," said Phil Smith of S&P Global ↗ 1.01% Market Intelligence.reuters

The broader eurozone manufacturing PMI came in at 51.9, up from 51.4 in June, with factory production volumes rising at the fastest rate since March 2022.seekingalpha

Supply Chain Risks Persist

Despite the positive readings, supply chain pressures tied to the Middle East conflict tempered optimism. In Singapore, the supplier deliveries index contracted for a seventh straight month as the collapse of a US-Iran interim ceasefire disrupted shipping through the Strait of Hormuz. OCBC chief economist Selena Ling called the conflict "a bugbear" affecting energy prices, trade flows, and logistics costs.straitstimes

Smith at S&P Global warned it was "difficult to imagine this performance being sustained without a resolution to the conflict in the Middle East, due to the corresponding volatility in oil prices and uncertainty". In the eurozone, average supplier delivery times lengthened considerably in July, though the deterioration was the least pronounced since the outbreak of the Middle East war.seekingalpha+1