Korea: Downturn in the manufacturing sector continues in July on weaker domestic demand
August 1, 2018
Business activity contracted in the manufacturing sector for the fifth consecutive month in July. The Nikkei manufacturing Purchasing Managers’ Index (PMI), reported by IHS Markit, fell to 48.3 in July from 49.8 in June. The index remained below the 50-point threshold that signals a contraction over an expansion in the manufacturing sector.
In July, new orders fell for the fifth consecutive month on the back of weaker domestic demand. Amid fewer new orders, total output fell at the steepest pace in three months. Lighter order books alleviated pressures on production lines, and employment in the manufacturing sector decreased for the fourth consecutive month. Moreover, corporate restructuring and rising retirements were also reported to be behind fewer jobs in July.
Meanwhile, both input and output prices increased in July, although output prices only increased modestly. Input prices were lifted amid higher oil prices, a weaker won and supply shortages. Amid weaker demand, manufacturers took the opportunity to reduce stocks of inputs and completed goods. Purchasing activity declined for the fourth time in five months in July.
Looking towards the coming 12 months, manufacturers’ optimism decreased slightly in July compared to June. However, firms still expect that output will increase over that one-year period.
Author: Edward Gardner, Economist