South Korea’s Factory Activity Expands in September on Strong Overseas Demand

South Korea’s manufacturing sector showed signs of recovery in September, marking its first expansion in eight months as global demand improved, according to the latest S&P Global survey. The Purchasing Managers Index (PMI) rose to 50.7 from 48.3 in August, surpassing the 50-point threshold that separates growth from contraction. This was the highest reading since August 2024, driven by stronger output and new orders.

The rebound was fueled by new product launches and mass production, with overseas demand increasing for the first time in six months, particularly in Asia-Pacific markets. However, the domestic economy remained sluggish, limiting overall momentum. Economist Usamah Bhatti from S&P Global Market Intelligence noted that conditions are likely to remain favorable in the near term as manufacturers reported higher outstanding work.

South Korea’s trade-reliant economy already recorded strong growth in the second quarter, supported by robust exports in the technology sector and a rebound in consumer spending. Still, ongoing uncertainty surrounds trade talks with the U.S., where a preliminary deal announced in July has yet to be formalized due to concerns about a $350 billion investment package and its foreign exchange implications. Tariffs imposed by the U.S. remain a potential risk for Korean exporters.

The survey also showed that input purchase inventories declined at the fastest rate since April 2024 due to rising demand, while backlogs of work grew for the first time in half a year. In response, manufacturers boosted new purchases to a 13-month high and expanded employment at the fastest pace in two years. Business confidence stayed positive, though slightly weaker than the previous month, with expectations pinned on new product rollouts and gradual domestic recovery.

At the same time, manufacturers remain cautious about the potential long-term impact of U.S. tariffs on key industries, balancing optimism with lingering trade concerns.