UPDATE 1-S.Korea's Feb output unexpectedly rises on-month on demand for cars, chips

chips@ (Adds analyst comment, details)

* Feb factory output +1.1 pct m/m s/adj (Reuters poll -0.5 pct)

* Feb factory output -6.4 pct y/y (Reuters poll -3.1 pct)

SEOUL, March 30 (Reuters) - South Korea's industrial output unexpectedly rose in February as robust overseas demand continued to boost production of memory chips and cars in a sign factory activity remained brisk.

Statistics Korea on Friday said factory output rose a seasonally adjusted 1.1 percent in February from January, expanding for a second month in a row and beating the median forecast of a 0.5 percent decline.

"Output of cars benefited from a low base as December saw car union strikes. Production of memory chips also was a positive impulse to February data," a Statistics Korea official said.

Factory output rose a downwardly revised 0.9 percent in January on-month.

From a year earlier, factory output dropped 6.4 percent compared with the forecast for a 3.1 percent decline, marking the biggest on-year decline since 2013.

An official with the Statistics Korea said the large on-year contraction in February was mostly due to distortions from the Lunar New Year period.

"The Lunar New Year holidays falling in February this year, as opposed to January for last year reduced the number of working days," the official said.

Although the recovery in industrial production has been uneven over the past year, the monthly gain in output supports optimism among policymakers that the economy can carry its recent run of strong growth into 2018 thanks to robust exports.

"Increasing public spending is lifting consumer spending and that will help increase production in the coming months," said Lee Sang-jae, chief economist, Eugene Investment and Securities.

The Bank of Korea expects the economy to expand by 3 percent this year, after 3.1 percent growth in 2017, the fastest expansion since it grew 3.3 percent in 2014.

In February, car production increased 5.1 percent from January while output of memory chips gained 4.7 percent.

(Reporting by Cynthia Kim; Additional reporting by Dahee Kim; Editing by Sam Holmes)