S.Korea factory activity shrinks as output falls, but export orders jump, PMI shows

SEOUL (Reuters) - South Korea's factory activity shrank for a second straight month in March as output fell on weak domestic demand even as export orders jumped at the fastest pace in 14 months, a private survey showed on Tuesday.

The Purchasing Managers Index (PMI) for manufacturers in Asia's fourth-largest economy, released by S&P Global, fell to 49.1 in March, from 49.9 in February.

It was the second straight month below the 50-mark, which separates expansion from contraction, and the lowest reading in three months.

Output fell for the first time in three months, while new orders slowed from the previous month, sub-indexes showed.

New export orders, however, rose for the fifth straight month and at the sharpest rate since January 2024, on demand improvements in key markets such as the United States and the Asia-Pacific region.

"Anecdotal evidence indicated that domestic economic weakness was offset by the strongest rise in new export sales since January 2024," said Usamah Bhatti, economist at S&P Global Market Intelligence.

Last week, SK Hynix, the world's second-largest memory chipmaker after Samsung Electronics, said some customers had brought forward orders ahead of U.S. tariffs.

U.S. President Donald Trump, who has introduced various tariffs against trading partners since taking office in January, said he would unveil reciprocal tariffs against every country this week.

The survey showed output prices rose in March at the fastest pace since November 2022, despite a slowdown in the rise of input prices, as firms continued to pass on costs to customers.

South Korean manufacturers' optimism for the year ahead weakened to a three-month low on concerns that economic conditions would remain challenging as a global trade war further disrupts sales.

(Reporting by Jihoon Lee; Editing by Shri Navaratnam)