South Korea manufacturing grows at fastest pace in more than five years

South Korea’s factories accelerated in May at their fastest pace in more than five years, lifting a key gauge of industrial health to 54.8 from 53.6 in April and underscoring how deeply the country is tied to the global tech cycle. The reading was the highest since March 2021 and came after output and new orders both expanded at their strongest rates in about five years, a sign that the rebound was broad rather than confined to one pocket of production.

The stronger reading matters because South Korea sits at the center of Asia’s manufacturing and export network, especially in semiconductors. The first quarter already brought the country its strongest economic growth in nearly six years, helped by booming chip exports as global investment in artificial intelligence surged. A Reuters poll also projected that South Korean exports would rise for a 12th straight month in May, extending a run that has helped support factories, shipping, and related investment across the economy.

Still, the May survey also showed that the recovery was not free of strain. New export orders fell for the first time in six months, as demand from China and the United States softened. Manufacturers were also building safety stocks as the Middle East conflict disrupted prices and supply conditions, a reminder that geopolitical risk is still feeding directly into procurement decisions and inventory planning.

The April survey had already hinted at the pressure points beneath the improvement. S&P Global said input prices and output charges climbed to the highest levels in the 22-year history of the survey, which began in April 2004, while business confidence dropped to a five-month low amid war-related uncertainty. Even so, production growth in April was the steepest in 20 months, and Trevor Balchin of S&P Global Market Intelligence said back-to-back PMI readings above 50 in early 2026 marked the first such stretch since mid-2024.

That combination makes South Korea one of the clearest signal stories in the current industrial landscape. A mid-50s PMI usually points to healthy expansion, and the latest data suggest that global demand for chips and related goods is still translating into real factory activity. Yet the drop in export orders shows how dependent that strength remains on the next leg of demand from China, the United States, and the broader AI-driven technology cycle. For now, South Korea is expanding fast, but the durability of that growth will depend on whether export momentum outlasts the latest surge in supply-chain caution.