Global Factory Output Holds Steady While Energy Costs Tighten Margins

Global manufacturing activity remained strong in October, yet factories are absorbing higher energy bills and supply chain delays, new surveys released Monday showed. The data indicates that export led economies are facing mounting pressure as the Middle East conflict keeps fuel and food prices elevated, affecting consumer spending and business confidence.

The S&P Global Eurozone Manufacturing Purchasing Managers Index fell to 52.7 in October from 52.9 in September. This reading was still above the 52.4 preliminary estimate and marks the highest level since May 2022. A score above 50 signals growth in industrial activity. Leo Barincou of Oxford Economics stated that the final figures confirmed the industrial sector's resilience. He added that price pressures are intensifying because strong demand is meeting constrained supply.

Input prices in the euro zone rose at their fastest pace since May, while output prices also increased rapidly. Barincou noted that these trends support the view that inflationary pressures will remain high. Preliminary data released earlier this week suggests inflation in the currency union nudged up to 4.0% in October, according to a Reuters poll. This figure keeps pressure on the European Central Bank to raise interest rates again.

The European Central Bank held rates steady last week as expected. However, economists polled by Reuters last month predicted another rate hike in December. In Germany, the manufacturing industry expanded solidly in October. In contrast, France’s sector slipped back into contraction. British manufacturers began the final quarter of 2026 with the strongest output growth in more than two years, though fast rising costs may prompt the Bank of England to raise interest rates this week.

Factory activity across Asia continued to expand in October, but growth slowed in China, Japan, South Korea, and Taiwan. Toru Nishihama, chief emerging market economist at Dai-ichi Life Research Institute in Tokyo, said that strong demand for chips and AI goods had previously masked weak spots in these economies. He explained that the prolonged Middle East war is making it harder to sustain that demand because it pushes up fuel and food prices.

Nishihama added that high inflation is hurting consumption across Asia and that intense price competition from China is weighing on exporters like Japan and South Korea. The RatingDog China General Manufacturing PMI stood at 52.0 in October, slightly below September's 52.1. Japan’s index eased, marking the slowest expansion in seven months as output and new orders lost momentum. South Korean factory activity grew at the slowest pace in eight months due to weaker output and demand.

Taiwan’s PMI showed solid growth in activity but slowed from the previous month. India’s manufacturing growth also decelerated as domestic demand and hiring weakened, although a surge in export orders helped offset the decline. The International Monetary Fund has projected that Asia’s economic growth will moderate next year. The fund warned of rising risks from the energy shock caused by the Iran war and a potential correction in the AI boom.