South Korea Manufacturing Sector Contracts Again

The S&P Global South Korea Manufacturing PMI increased to 52.6 in March 2026 from 51.1 in February. It marked the strongest growth in factory activity since February 2022, as both output and new orders rose, with the former increasing at the steepest rate since August 2024 amid improved domestic demand. Meanwhile, employment rose for the first time in three months, with the rate of job creation hitting a six-month high amid reports that companies looked to take on full-time staff. Consequently, firms recorded a third consecutive monthly accumulation in backlogs of work, though the latest increase was only fractional overall. On prices, input cost inflation accelerated to its fastest pace since June 2022. As a result, output cost inflation also accelerated to the greatest degree since July 2022. Looking ahead, business sentiment deteriorated to a four-month low amid rising geopolitical tensions.

The S&P Global South Korea Manufacturing PMI came in at 51.1 in February 2026, easing marginally from 51.2 in January but signaling a third straight month of expansion in factory activity. Firms reported firmer output growth alongside a solid increase in new orders. Manufacturers frequently cited a strengthening semiconductor industry, which lifted sales to both domestic and overseas clients and shaped purchasing activity during the month. However, corporate restructuring efforts and the non-replacement of departing staff led to the sharpest contraction in employment since September 2020. At the same time, companies indicated a continued and pronounced rise in operating costs, largely attributed to elevated raw material prices and exchange rate volatility. Looking ahead, sentiment toward the year-ahead outlook remained positive midway through the first quarter, supported by the ramp-up in mass production of newly launched products and further gains in both domestic and external demand.

The S&P Global South Korea Manufacturing PMI rose to 51.2 in January 2026 from 50.1 in December, reaching its highest level since August 2024 as the health of the manufacturing sector strengthened. Three of the PMI’s five components contributed positively in January, including new orders, output and suppliers’ delivery times, while employment and stocks of purchases showed slight negative influences. Demand for South Korean goods picked up at the start of 2026, with Mainland China, North America and Europe all cited as sources of growth. The sustained increase in new orders supported renewed production growth in January, only the second gain in the past 11 months. The 12-month outlook also improved to the highest since May 2022 as manufacturers anticipated new product lines, diversification and expanded capacity to drive growth. Inflationary pressures, however, persisted, likely fueled by a weak exchange rate and higher metals prices.