South Korea factory activity expands at fastest pace in two years

By Thomson Reuters Jun 2, 2024 | 7:39 PM

By Jihoon Lee

SEOUL (Reuters) – South Korea’s factory activity expanded in May at the fastest pace in two years on stronger growth in output and orders thanks to broadening global demand, a private-sector survey showed on Monday.

The purchasing managers index (PMI) for manufacturers in Asia’s fourth-largest economy, compiled by S&P Global, rose to 51.6 in May, from 49.4 in April, on a seasonally adjusted basis.

It was the highest reading since May 2022, and comes after two consecutive months below the 50-mark separating expansion from contraction.

Output jumped at the quickest rate since July 2021, while new orders increased by the most since February 2022 thanks to new product launches, stronger export sales and greater domestic client appetite, according to the survey.

New export orders rose for a fifth straight month, as manufacturers recorded sales growth across various markets, from Europe to North and South America, as well as Asian countries like China, Japan and Vietnam.

South Korea’s exports have been growing since October and provided the biggest boost to the trade-reliant economy’s first quarter growth, which was the fastest in more than two years.

“South Korea’s manufacturing sector appears to have caught a second wind,” Joe Hayes, principal economist at S&P Global Market Intelligence, said.

“Qualitative evidence from the survey also paints a promising forward-looking picture, with panelists commenting on imminent new product launches providing them with a platform for sustainable production expansion.”

To meet robust demand, manufacturers raised their purchases by the biggest since April 2022.

On the downside, however, inflation in input prices was the fastest in seven months amid unfavourable exchange rate movements and higher prices of raw materials, such as aluminium, nickel and copper.

Manufacturers’ optimism for the year ahead slipped in May, after logging a near two-year high in April, but it was still the second-highest since June 2022.

(Reporting by Jihoon Lee; Editing by Shri Navaratnam)