Europe's factories grow, Asia's activity shrinks

Post by : Monika

Photo: Reuters

In August 2025, the world saw a clear split in factory performance: Europe’s makers of goods started growing again, while factories in Asia—especially in places like Japan, South Korea, and Taiwan—shrunk.

Europe: Factories Grow Again

In the euro zone (a group of European countries that use the euro), factory activity finally expanded for the first time since mid-2022. A special index called the HCOB Eurozone Manufacturing PMI rose to 50.7 from 49.8, passing the point that separates growth from contraction. This suggests that demand inside Europe helped factories recover, despite high trade barriers from the U.S.

Countries like Greece and Spain saw strong growth. In Germany, Europe’s largest economy, factory activity still fell but the decline slowed down.

Asia: Factories Shrink

In contrast, Asia faced tough times. Survey reports show manufacturing activity fell in Japan, South Korea, and Taiwan in August. This marks the seventh straight month of shrinking factory activity in South Korea, with its index at 48.3, still below the 50 growth line.

Japan also remained under 50, with a reading of 49.7. The drop came mainly because exports weakened; factories exported less to countries like China, Europe, and the U.S.

Taiwan and other export-focused countries also saw factory activity fall, reflecting strong global headwinds such as slower demand and rising U.S. tariffs.

China: Mixed Signals

In China, two surveys painted a mixed picture. An official measurement showed factory activity shrank for the fifth month in a row, highlighting ongoing struggles with soft demand, trade uncertainty, and problems in sectors like housing.

At the same time, a private survey—known as the RatingDog PMI—reported slight growth: it rose from 49.5 to 50.5. This suggests that while official data shows trouble, some parts of China's economy may be starting to recover.

Key Points to Remember
Region Situation Reasons

• Europe Factory activity rose above 50 PMI    Strong domestic demand
• Asia Manufacturing contracted US tariffs, falling exports, weak demand
• China Official PMI showed contraction
• Private PMI showed slight growth Ongoing weakness, some local order gains

For European Economies: The recovery in factory activity brings hope that consumer demand and growth are improving, even with global challenges.

For Asia: Export-heavy economies are struggling under the weight of U.S. tariffs and weaker overseas demand. Countries like Japan and South Korea are especially vulnerable.

For China: The mixed data points to a rough path forward—some recovery might be taking root, but major challenges remain.

Europe factory growth