South Korea's manufacturing sector experienced growth in January for the first time in 19 months, as revealed by a private-sector survey released on February 1. The survey, conducted by S&P Global, indicated an improvement in factory activity, with output and orders rebounding due to increased demand in key export markets. S&P Global's purchasing managers index (PMI) for South Korean manufacturers climbed to 51.2 in January, up from 49.9 in December on a seasonally adjusted basis. This marks the first time since June 2022 that the index surpassed 50, indicating expansion rather than contraction. Usamah Bhatti, an economist at S&P Global Market Intelligence, noted, The health of the South Korean manufacturing sector registered a renewed improvement at the start of 2024.
Output, new orders, and exports all saw a return to growth, with a more significant expansion in purchasing, as per sub-indexes. After declining for 20 and 18 months, output and new orders both increased in January. Fueled by growing orders, stocks of finished goods experienced their most significant reduction in five months, while the volume of purchases rose at the highest rate since April 2022. Particularly noteworthy was the surge in new export orders, marking the first increase since July 2023 and the most rapid pace since February 2022. This improvement was attributed to heightened demand for manufactured goods from key markets like the United States and mainland China, according to the survey.
In contrast, South Korea's economy, the fourth-largest in Asia, exhibited its slowest growth in three years in 2023 due to lackluster exports. However, there was a recovery towards the end of the year, and further improvement is anticipated in 2024 to drive more robust growth. The survey also highlighted challenges faced by manufacturers, including pressures on raw material prices and disruptions in logistics caused by the unrest in the Red Sea. Input prices accelerated in January for the first time in three months, and supplier delivery times worsened for the sixth consecutive month. Despite these challenges, manufacturers expressed optimism about the future, with expectations for future output reaching their highest point since August 2023, driven by hopes of a domestic and global economic recovery boosting business confidence.