SEOUL (REUTERS) - South Korea's factory activity expanded at its fastest pace in nearly 11 years in February, a private survey showed on Tuesday (March 2), as the strongest growth in over a decade in production and new orders drove the recovery in the manufacturing-heavy economy.

The IHS Markit purchasing managers' index (PMI) jumped to 55.3 in February from 53.2 in January, marking the strongest level since April 2010 when it stood at 57.1. The 50-mark threshold separates growth from contraction.

"Both output and new orders expanded at the fastest pace in close to 11 years in the latest survey period as manufacturers reported increasing demand and new product development had boosted the overall health of the sector," said Usamah Bhatti, economist at IHS Markit.

The sub-index for output stood at 57.2, marking the sixth straight month of expansion and the sharpest increase since April 2010.

New orders also grew the most since April 2010, while new export orders extended growth to a fifth month albeit at a softer pace from a month earlier.

Respondents largely attributed the improvement to higher domestic demand at home and in Southeast Asian markets. The increased new business also helped to stabilise employment levels last month, the survey showed.

Looking ahead, businesses were solidly optimistic in February with confidence surging to its highest in eight years.

"IHS Markit currently estimates industrial production to grow 1.4 per cent in 2021, with expectations for it to be a key contributor to economic growth in South Korea," Mr Bhatti said.

The Bank of Korea currently sees the economy expanding 3.0 per cent and 2.5 per cent, respectively, for this year and next.