Korea: Factory activity shrinks at slower pace in March
April 1, 2016
Manufacturing activity in South Korea did not improve substantially in March, and thus remained depressed in the first three months of the year. The Nikkei Purchasing Managers’ Index (PMI), which is published by Markit, edged up from 48.7 in February to 49.5 in March. Despite the increase, the index didn’t make it across the 50-threshold that separates contraction from expansion in the sector.
The mild, although disappointing, improvement stemmed from a softer deterioration in production and a stabilization in new orders. Due to persisting weakness in activity, firms reported additional job cuts. However, the cuts were less strong than in previous months. Regarding a stabilization in new orders, Korean goods producers signaled that they did not see a meaningful increase in new work as they continue to face rising competition from abroad, especially from Japan. Regarding global demand, firms reported a second consecutive decline, which stemmed from slower global demand. On the price front, higher prices for imported goods continued to be observed, despite the recent strengthening of the Korean won against the U.S. dollar.
In a statement, Markit commented that, “operating conditions at South Korean manufacturers worsened at a weaker rate at the end of the first quarter of 2016. Production contracted at a slower rate, supported by a stabilization in new orders. This suggests that the downturn in official manufacturing production will ease from January’s six-month low (-2.1% year-on-year). Goods producers cut back on staff numbers, although at only a slight rate.”