South Korea's factory production unexpectedly jumped in May, led by cars and chips, official data showed on Friday, while retail sales also rose last month in an encouraging sign for a slowly recovering economy.

The industrial output index rose 3.2 percent in May on a seasonally-adjusted monthly basis, the Statistics Korea data showed, compared with losses of 0.6 percent in April and 0.8 percent tipped in a Reuters survey.

The gain also topped the highest estimate of a 2.8 percent rise in the poll.

By product, output of automobiles jumped 8.7 percent and semiconductors rose 4.4 percent over the month, whereas communication devices slumped 16.9 percent.

Factory output fell 7.3 percent on an annual basis, which was also milder than a 9.0 percent decline in April and 8.4 percent drop expected by economists.

The finance ministry said after the data that it showed the economy was on a recovery path after a slight correction the previous month. Downward pressure has eased though risks remain, it added.

Factory output will rebound in the second quarter after four straight quarters of losses, as exports bottom out, the ministry said.

The all-industry production index, which includes both the manufacturing and services sectors, rose 1.3 percent in May on-month, recouping April's 1.3 percent loss.

Retail sales rose 0.4 percent in May, after dropping 2.6 percent in April, which was the worst in five months. (Reuters)