South Korea's PMI hits decade high as export demand surges

SEOUL, Feb 1 (Reuters) - South Korea’s factory activity rose at its fastest pace in a decade in January, a business survey showed on Monday, as soaring exports drove the recovery in the manufacturing-heavy economy.

The IHS Markit purchasing managers’ index (PMI) rose to 53.2 in January from 52.9 in December, the highest reading since February 2011. The 50-mark threshold separates growth from contraction.

“South Korean manufacturers began 2021 in a similar vein to the way the previous year ended,” Usamah Bhatti, economist at IHS Markit. “The latest manufacturing PMI indicated a sustained improvement in the health of the sector, with the strongest expansion in the manufacturing sector for close to a decade.”

Readings of output, new orders and new exports all increased in January, according to the survey.

Respondents largely attributed higher foreign demand to stronger client confidence as the worst of the pandemic subsides in Asia’s fourth-largest economy.

South Korea experienced its third and strongest wave of infections this winter but is seeing a gradual decline in new cases this month.

Exports jumped at the fastest pace in more than two years in December, fuelling hopes for a strong rebound this year amid insatiable global appetite for work-from-home technology and health care equipment.

Sales at South Korean chipmakers including Samsung Electronics and SK Hynix have been surging, with SK reporting a fourfold jump in profit on Friday.

A recent Reuters poll of 27 economists forecast the economy to grow 3.0% this year, in line with the Bank of Korea’s projections.

Reporting by Cynthia Kim; Editing by Sam Holmes