South Korean factories rapidly expand capacity, benefiting from global demand growth.

According to a private survey released on Download the formal platform for buying ups and downsMonday, South Korea's factory activity in May expanded at the fastest pace in two years, driven by strong growth in output and orders due to increasing global demand.

The manufacturing Purchasing Managers' Index (PMI) for Asia's fourth-largest economy, compiled by S&P Global, rose to 51.6 in May, up from 49.4 in April. After seasonal adjustments, the index indicates expansion.

This is the highest reading since May 2022 and marks the first rebound after two consecutive months below the expansion-contraction threshold of 50.

The survey indicated that output grew at the fastest rate since July 2021, driven by the launch of new products, stronger export sales, and increased domestic customer demand, while new orders saw their largest increase since February 2022.

New export orders rose for the fifth consecutive month, with manufacturers reporting sales growth across all markets from Europe to North and South America, as well as in Asian countries such as China, Japan, and Vietnam.

Since October, South Korea's exports have been on the rise, providing the largest boost to the trade-dependent economy's first-quarter growth, which was the fastest quarterly growth in over two years.

Joe Hayes, chief economist at S&P Global Market Intelligence, stated, "South Korea's manufacturing sector seems to be experiencing a second growth opportunity."

"Qualitative evidence from the survey also paints a hopeful outlook, with participants commenting that impending new product launches provide a platform for sustainable production expansion."

To meet the strong demand, manufacturers' purchasing volumes in May reached their highest level since April 2022.

However, unfavorable exchange rate fluctuations and rising prices of raw materials such as aluminum, nickel, and copper led to the fastest input price inflation in seven months.

While manufacturers' optimism for the coming year in May slightly declined from near two-year highs in April, it remains the second highest level since June 2022.

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