Manufacturing activity in Japan, South Korea, and Taiwan showed signs of cooling in October, according to S&P Global surveys. South Korea’s PMI reached 51.3, marking an eight-month low, while Japan’s PMI fell to 53.3, the lowest level in seven months. Taiwan’s manufacturing index dropped to 54.9 from 56.7 in the previous month. Conversely, China’s official manufacturing PMI declined to 49.3, indicating a contraction in activity.
The International Monetary Fund projects regional growth in Asia and the Pacific to moderate to 4.8% in 2026 and 4.4% in 2027, down from 5.0% in 2025. The IMF identified a potential correction in AI-driven demand as a primary economic risk. Its models suggest that a sharp decline in AI demand could reduce Asia’s output by approximately 1.7% below baseline, specifically impacting technology supply chains.
The Bank of Korea estimates that a slowdown in AI-related capital expenditure could reduce the nation’s semiconductor exports by $50 billion to $100 billion. Such a decline in exports might lower South Korea’s 2027 GDP growth by 0.4 percentage points. Additionally, IMF analysis of 40 million job postings indicates that demand for AI-exposed roles has decreased by nearly 10% since November 2022.
