South Korea factory activity grows at slower pace as export demand weakens, PMI shows

South Korea's manufacturing sector continued its expansion in June, marking seven months of growth. However, the pace slowed compared to May, primarily due to a decline in export demand. The S&P Global Purchasing Managers' Index (PMI) registered 52.1, down from 54.8 the previous month.

Both factory output and new orders saw slower growth. New export orders, in particular, decreased for the second consecutive month. This downturn is partly attributed to the lingering impact of the Middle East conflict on supply chains. Firms reported that rising raw material prices and difficulties in sourcing and receiving inputs further hampered sector performance.

Business confidence for the upcoming year has weakened to its lowest point since November 2025. Concerns over the domestic economy's health and the potential for sustained high raw material prices are contributing to this cautious outlook. This follows a trend where South Korea's factory output had already fallen in May, despite the economy experiencing its strongest quarterly growth in nearly six years due to a boom in chip exports.

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Firms frequently reported that rising raw material prices, alongside difficulties sourcing and receiving inputs due to delays and shortages, weighed on sector performance.