Korea PMI August 2016


Korea: Korean manufacturing activity falls into contraction in August

September 1, 2016

Activity in Korea’s manufacturing sector deteriorated significantly in August. The Nikkei Purchasing Managers’ Index (PMI) reported by IHS Markit fell from 50.1 in July to 48.6 in August. The result points to a contraction in operating conditions since the indicator moved below the 50-threshold that separates expansion from contraction in the sector. August’s print is also the lowest result in a year.

According to IHS Markit, the manufacturing PMI fell into contractionary territory for the first time since March as both production and new orders declined substantially. Consequently, firms decreased their purchasing activity drastically in August but, on a positive note, employment remained strong. Regarding price developments, Korean goods producers signaled that input prices had eased to a five-month low in August, while output charges fell only marginally.

Commenting on August’s result, analysts at IHS Markit said that, “Manufacturing conditions in South Korea worsened in August, following a short period of modest growth. Both production and new orders declined sharply leading to a further fall in buying activity. Despite this, manufacturers continued to hire additional workers, albeit at a slightly weaker rate.”

FocusEconomics Consensus Forecast panelists expect fixed investment to expand 2.6% in 2016, which is down 0.2 percentage points from last month’s forecast. In 2017, the panel expects growth in fixed investment to increase 2.8%.

Author:, Senior Economist

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Korea PMI Chart

Korea PMI August 2016 1

Note: Nikkei Korea Purchasing Managers’ Index (PMI). A reading above 50 indicates an expansion in business activity while a value below 50 points to a contraction.
Source: Nikkei and IHS Markit

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