South Korea factory activity strengthens in July on rising orders
Output and new orders both picked up pace at start of second half.
South Korea’s manufacturing sector gathered momentum in July, with output and new orders both expanding faster than the previous month as demand strengthened, particularly in the semiconductor and automotive industries, the latest S&P Global survey showed.
The seasonally adjusted South Korea Manufacturing PMI rose to 53.1 in July from 52.1 in June, a rate of improvement above the survey’s long-run average and amongst the strongest seen in the past four years.
Production volumes rose solidly, with manufacturers pointing to stronger order intakes for cars and chips as the main driver.
New orders extended their run of growth to eight consecutive months, helped by fresh product launches and a brief easing of Middle East tensions earlier in the month.
Export sales returned to growth after a three-month dip, and did so at their fastest pace since April 2021. Firms responded by hiring more staff, though only marginally, and by stepping up purchasing for the eighth straight month as they built stocks against further price rises and supply disruption. Backlogs of work rose for a seventh consecutive month, their softest rate in four months, whilst supplier delivery delays persisted, linked in part to the continuing war in the Middle East.
Input prices rose sharply again in July, driven by higher raw material costs and an unfavourable exchange rate that pushed up the price of imports. Even so, the pace of inflation slowed to its weakest since before the outbreak of the Middle East war, allowing manufacturers to raise their own charges more gently, with factory gate inflation easing to a four-month low. Confidence in the 12-month output outlook strengthened further, marking a full year of unbroken optimism, underpinned by hopes for continued order growth and new launches in the chip and auto sectors.
Usamah Bhatti, economist at S&P Global Market Intelligence, said operating conditions had improved more strongly as the second half began, with both production and new orders rising again and particular strength in semiconductors and autos. He noted that input cost inflation had slowed to a pace last seen just before the war broke out, though it remained well above its long-run average, and flagged that price developments would be a key indicator to watch given the recent intensification of tensions in the Middle East.
