October factory surveys split: AI demand lifts Asia while Italy and Canada slip into contraction on war-driven supply disruption

Asia’s factory activity was buoyed by demand linked to artificial intelligence in October, though cracks emerged¹. Demand growth was driven mainly by new product launches and improved production capabilities, and exporters reported higher sales volumes¹. South Korea’s chip-led exports accelerated, bringing its $1 trillion annual export target closer².

In Europe the picture was weaker. Italy’s manufacturing sector unexpectedly contracted in October, according to a purchasing managers’ survey published on Monday^6,7. Supply chain disruption caused by the conflict in the Middle East squeezed margins⁶. Greece’s manufacturing sector still expanded, but at its weakest pace since May, as supply disruption and rising energy, fuel and transport costs weighed⁸.

Canada’s factory sector contracted for the first time in 2026, its survey showed, with firms also reporting supply-chain disruption and an intensification of price pressures⁹.

Why it matters to investors

The surveys point to a two-speed industrial economy. Producers tied to AI hardware are still seeing orders rise^1,2, while manufacturers exposed to energy and shipping costs are losing momentum^6,8.

China sits between the two, and the readings are mixed. One account described the private manufacturing gauge as showing steady expansion in October³. Another said factory growth slowed as export orders eased⁴. Intense domestic competition has pushed Chinese producers to cut prices, a move likely to further anger China’s trading partners⁵.

For Europe, the link to the Middle East war is explicit in the survey commentary. Italian firms cited supply chain disruption from the conflict^6,7, and Greek firms cited rising energy, fuel and transport costs⁸. Greece’s reading marked a five-month low⁸. Italy’s annual inflation rate also jumped, according to one account of the data⁷.

For Asia, the warning is in the word cracks: the AI-driven strength is real, but it is concentrated in specific products¹.

What to watch

Investors will watch whether Korea’s chip exports keep accelerating toward the $1 trillion target², since that would show whether the AI-driven demand that lifted Asian factories in October is broadening or narrowing¹.

In Europe, the next surveys will show whether Italy’s contraction spreads and whether Greece’s slowdown deepens^6,8.

In China, the gap between steady expansion and easing export orders will be tested by trade data and by trading partners’ response to price cutting^3,4,5.