Korea: Downturn in the manufacturing sector intensifies in April
May 2, 2018
The manufacturing sector signaled a contraction in business activity for the second consecutive month in April. The Nikkei manufacturing Purchasing Managers’ Index (PMI), reported by IHS Markit, ticked down to 48.4 in April from 49.1 in March. The index therefore remained below the 50-point threshold that signals a contraction over an expansion in the manufacturing sector.
In April, output in the manufacturing sector fell for the second month in a row. Fewer sales of electronic products and automobiles, coupled with skilled labor shortages, were cited by manufacturers as reasons for the decline. New business orders also registered a broad-based fall, and, because of this, manufacturers reduced both their purchasing activity and inventory holdings in April. Backlogs of work from previous orders were also partially depleted but, despite weaker demand pressures, manufacturing suppliers’ delivery times worsened in April. Meanwhile, on the employment front, with a calmer manufacturing line and January’s minimum wage hike both deterring hiring activity, there were fewer employees working in the manufacturing sector in April.
In terms of price developments, input prices increased strongly, as did firms’ output prices in response. Overall, although some manufacturers noted concern about geopolitical risks in April, they generally remained positive about the future of their sector in April, with some of them expecting an improvement in demand.
Author: Edward Gardner, Economist