South Korea’s Manufacturing Index Falls to 51.3 in October as Growth Slows to Weakest Since February
Key Facts
South Korean manufacturing activity growth slowed in October to its weakest pace since February, with the S&P Global Purchasing Managers’ Index falling to 51.3 from 53.9 in September. The index remained above 50, the level separating expansion from contraction, for an 11th consecutive month. The reading means industrial activity continued to expand, but at a slower pace, contrary to what some initial versions of the report suggested by describing a contraction. Reuters reported that growth in output and new orders lost momentum during the month. This coincided with strong export data, highlighting a divergence between factory performance and the country’s overseas sales.
Output growth in October was the slowest in 10 months, while the increase in new orders was at its weakest pace in 4 months, Reuters reported. Usamah Bhatti of S&P Global Market Intelligence said companies repeatedly cited slowing demand, raw material shortages and rising costs as factors weighing on performance. The report also noted that some companies reported weaker demand for cars. These factors reflect pressure on factory activity even as the index remained in expansion territory.
In trade, South Korean exports rose 93.7% year on year in October to $115.28 billion, exceeding the Reuters poll’s average forecast of 93.2%. The increase outpaced September’s 83.7% growth, marking the fastest pace since January 1974. Reuters noted that the different timing of the Chuseok holiday increased the number of working days compared with the previous year. Manufacturers’ international sales also benefited from demand in the Asia-Pacific region, while U.S. demand remained relatively subdued. The divergence shows that strong export growth was not accompanied by a comparable improvement across all sources of demand for industrial goods.
Semiconductors were the biggest driver of exports, with overseas sales surging 259.4% in October to $56.44 billion. The report attributed the continued rise in prices and volumes to major technology companies continuing to invest in their facilities amid the race for AI leadership. The surge provides important context for the trade figures, as much of the momentum was concentrated in the chip sector. By contrast, purchasing managers’ data showed slower growth in output and new orders across manufacturing activity. This reflects the difference in the composition of performance between the chip sector, which is geared toward external demand, and the broader factory indicators.
South Korea’s economy grew 1.0% in the third quarter, exceeding market expectations, supported by a global boom in AI chips that boosted exports and investment, Reuters reported. Trade, Industry and Energy Minister Kim Jung-kwan said reaching $1 trillion in annual exports during November was “certain,” after October exports exceeded $110 billion. Total exports reached $930 billion from January through October. The minister added that surpassing the $1 trillion threshold would make South Korea the fourth country in the world to achieve that level, after the United States, China and Germany. Slower manufacturing data in October remains part of an economic picture supported by strong exports and third-quarter growth.
September data point to continued trade momentum ahead of October’s surge: exports rose 83.5% year on year to a record monthly level, and semiconductor exports also hit a record. It was the 16th consecutive month of export growth, Reuters reported. The next nearby economic release is the October consumer price index on November 3, according to the South Korean Ministry of Data and Statistics’ schedule.