Korea: Business conditions worsen slightly in December
January 2, 2019
The manufacturing Purchasing Managers’ Index (PMI), produced by Nikkei and reported by IHS Markit, rose to 49.8 in December from 48.6 in November. Despite the improvement, the PMI reading remained below the crucial 50-point threshold separating contraction from expansion in the manufacturing sector for the second month running.
The result was primarily due to reduced sales to both domestic and foreign clients, leading manufacturers to clip output, employment and stock levels. In terms of prices, input costs rose at a weaker pace in December than in November, while output costs decreased in December, contrasting the increase in November. Looking ahead, output optimism among businesses in the manufacturing industry was at the highest level in six months in December.
Commenting on the PMI outturn in December, Joe Hayes of IHS Markit said:
“Survey data for South Korea’s manufacturing sector continues to point to underlying weakness brewing within the domestic economy. Export markets also remained in downturn, as sales to Europe and China reportedly dropped off at the back-end of the year. The lacking pressure from the demand-side led firms to discount prices to remain competitive and pull in clients. Fortunately, this fell in line with weaker cost inflation. Nevertheless, there was a strengthening of manufacturing confidence.”
Korea Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists expect fixed investment to expand 0.1% in 2019, which is down 0.8 percentage points from last month’s forecast. In 2020, the panel expects fixed investment to grow 1.9%.
Author: Edward Gardner, Economist