Key insights
- South Korea's factory activity saw its strongest growth in over five years in May, driven by stock-building efforts in anticipation of Middle East conflict impacts. While overall PMI rose, new export orders declined due to muted demand from China and the US. This suggests potential headwinds for global demand, though the AI chip export boom remains a positive for South Korea's economy. The direct influence on US equities is neutral, as the news highlights specific regional supply chain dynamics and demand variations rather than broad US economic shifts.
SEOUL, June 1 (Reuters) - South Korea’s factory activity expanded in May at the strongest pace in more than five years on efforts made by manufacturers to brace for the impact of the Middle East conflict, a survey showed on Monday.
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The purchasing managers index (PMI), published by S&P Global, stood at 54.8 in May, up from 53.6 in April, to reach the highest since March 2021.
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Output and new orders grew at the strongest paces in about five years. New export orders fell for the first time in six months as demand was muted in China and the U.S.
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"South Korea’s manufacturing sector continued its upward trajectory in May, though the positive headline reading should be viewed with an air of caution," said Usamah Bhatti, economist at S&P Global Market Intelligence.
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"Anecdotal evidence from respondents often linked expansions to stock building efforts as the war in the Middle East continued to cause price increases and disrupt supply conditions for the manufacturing economy," Bhatti said.
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South Korea’s factory output was weaker than expected in April. In the first quarter, Asia’s fourth-largest economy delivered its strongest growth in nearly six years on booming chip exports amid a global surge in AI investment.
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