Korea: Business conditions remain in the doldrums in March
April 1, 2019
The manufacturing Purchasing Managers’ Index (PMI), produced by Nikkei and reported by IHS Markit, perked up to 48.8 in March, from 47.2 in February. That said, the PMI reading was still below the crucial 50-point threshold separating contraction from expansion in the manufacturing sector for the fifth consecutive month.
March’s depressed reading was primarily the result of a fall in production levels due to a drop off in new orders. Subdued demand for Korean manufactured goods both domestically and abroad—specifically in China and Europe—was cited as the key driver leading to the fall in new orders. Lower production led stocks of finished goods to dip at the fastest pace in over 18 months, while backlogs of work also declined. Moreover, production requirements, restructuring plans and efforts to cut costs led firms to cut employment levels for the fifth consecutive month. On the price front, input cost inflation ticked up. In contrast, output prices continued to fall as clients demanded discounts and businesses lowered prices to shrug off the competition. On the upside, firms expect output levels to increase over the coming 12 months, although optimism remains below the long-run average.
Author: Steven Burke, Economist