Korea: Downturn in the manufacturing sector continues in May
June 1, 2018
Business activity contracted in the manufacturing sector for the third consecutive month in May, although to a lesser extent than in April. The Nikkei manufacturing Purchasing Managers’ Index (PMI), reported by IHS Markit, ticked up to 48.9 in May from 48.4 in April. Despite the increase, the index remained below the 50-point threshold that signals a contraction over an expansion in the manufacturing sector.
In May, production in the manufacturing sector fell for the third consecutive month. This was because fewer orders came in from both Korea and other countries. With less pressure on the production line, headcounts were cut in May. This employee reduction was exacerbated by the introduction of a higher minimum wage in January. Nonetheless, with fewer orders to contend with, manufacturers were able to clear backlogs of work at a quicker pace in May than in April. This was not helped, however, by a slowdown in manufacturing suppliers’ delivery times. Meanwhile, on the price front, input prices rose for a tenth month in succession in May, leaving businesses in the sector to respond by raising output prices.
In terms of the coming 12 months, manufacturers remained optimistic for future business conditions. New product launches and stronger demand are expected to support the manufacturing sector.
Author: Edward Gardner, Economist