Korea PMI May 2016


Business conditions in manufacturing sector stay the same in May

Business conditions in Korea’s manufacturing sector remained virtually unchanged in May, after having improved in April from three months of deterioration. The Nikkei Purchasing Managers’ Index (PMI), which is published by Markit, edged up from 50.0 in April to 50.1 in May. Conditions in the manufacturing sector remained stable in May as the indicator stood just above the 50- threshold that separates expansion from contraction in the sector.

According to Markit, the mild improvement registered in the indicator was mainly the result of an increase in new orders and consequently in manufacturing production. However, Markit pointed out that the increases observed in May were “fractional” compared to the previous month. The survey in May also showed that due to moderate increase in production, firms resumed buying activity and employment picked up to a five-month high. Regarding price developments, respondents to the May survey stated that they faced a sharp increase in input prices, but that they decided to not increase output prices. In fact, the majority of firms acknowledged lower charges in May due to “increased competition and pressure from clients.”

Regarding May’s developments, Markit commented that, “operating conditions in South Korea improved slightly mid-way through the second quarter of 2016. Both output and new orders increased marginally, resulting in a further boost in employment growth. New orders from abroad also rose in May and for the first time since January.” Markit added that, “inflationary pressures remained sharp, with greater raw material costs (partly stemming from shortages) helping to push up input prices. Charges, on the other hand, decreased due to increased competition and pressure from clients.”

FocusEconomics Consensus Forecast panelists expect fixed investment to expand 3.3% in 2016, which is unchanged from last month’s forecast. In 2017, the panel expects growth in fixed investment to increase 3.0%.

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Korea PMI Chart

Korea PMI May 2016

Note: Nikkei Korea Purchasing Managers’ Index (PMI). A reading above 50 indicates an expansion in business activity while a value below 50 points to a contraction.
Source: Nikkei and Markit

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