Korea: Business conditions worsen in February at fastest pace since June 2015
The manufacturing Purchasing Managers’ Index (PMI), produced by Nikkei and reported by IHS Markit, fell to a 44-month low of 47.2 in February, down from 48.3 in January. The PMI reading was therefore below the crucial 50-point threshold separating contraction from expansion in the manufacturing sector for the fourth consecutive month in February. Joe Hayes, economist at IHS Markit, reflected: “The continued deterioration in PMI data suggests the November rate hike by the Bank of Korea has been ill-timed.”
This latest PMI outturn was primarily due to fewer new orders from both domestic and overseas markets, leading output to fall at the most pronounced pace since July 2017. In line with weaker output, headcounts were cut in February for the fourth consecutive month and at the fastest pace in nine months. Manufacturers also reduced their stocks of both inputs and finished goods in February, while, surprisingly, supply delivery times lengthened, despite the weaker demand environment. In terms of prices, input costs were broadly unchanged in February from January, whilst output charges fell at the sharpest rate since January 2016. Looking ahead, business confidence improved slightly in February, although it remained downbeat by historical standards.