South Korea Factory Activity Hits 18-Month High as Export Demand Surges

South Korea’s manufacturing sector showed its strongest momentum in nearly a year and a half in January, driven by a sharp rebound in export demand and improving business confidence, according to a private sector survey released Monday. The latest data signals a potential turning point for Asia’s fourth-largest economy after a period of slowing growth and weak global trade conditions.

The S&P Global Purchasing Managers’ Index (PMI) for South Korean manufacturers rose to 51.2 in January from 50.1 in December, marking the highest level since August 2024. A PMI reading above 50 indicates expansion, and January marked the second consecutive month the index remained in growth territory, a milestone not seen since August 2024. This sustained improvement suggests that factory activity is gaining traction after months of stagnation.

Manufacturing output increased for the first time in four months, while new orders expanded at the fastest pace since June 2024. Export orders were a key driver, posting their strongest growth since April 2021. According to the survey, demand improved notably across major markets including China, North America, and Europe, reflecting stabilizing global conditions and stronger overseas appetite for South Korean goods.

Manufacturers also expressed growing optimism about the year ahead, with business confidence reaching its highest level since May 2022. Companies cited new product launches, market diversification, and favorable conditions in strategic sectors such as automobiles and semiconductors as major factors supporting future growth. The global surge in artificial intelligence investment has particularly boosted demand for advanced chips, a cornerstone of South Korea’s export economy.

Despite this positive data, South Korea’s economy unexpectedly contracted in the final quarter of 2025, recording its steepest decline in three years due to weaker investment and exports. However, policymakers are increasingly confident about a recovery. The South Korean government recently raised its 2026 growth forecast to 2.0% from 1.8%, while the central bank has also signaled a possible upward revision to its outlook.

Additional PMI indicators reinforced the improving trend, with input purchases rising at the fastest pace since August 2024 and backlogs of work increasing to a 10-month high. Together, these signals point to strengthening demand and a more resilient manufacturing outlook for South Korea in the months ahead.