Korea: Manufacturing activity deteriorates mildly in July
August 1, 2016
Business conditions in Korea’s manufacturing sector registered a slight deterioration in July after June’s improvement. The Nikkei Purchasing Managers’ Index (PMI)—published by IHS Markit—edged down from 50.5 in June to 50.1 in July. The result points to a virtual stagnation of operating conditions since the indicator remained just above the 50-threshold that separates expansion from contraction in the sector.
According to IHS Markit, July’s sluggishness was mainly driven by a drop in new orders, which fell at the fastest pace since February. The decline in new orders reflected weaker domestic demand, since new exports rose. As a result, manufacturing firms lowered their input purchasing and decreased their inventories. Despite the perceived stagnation of operating conditions, employment increased for the fourth consecutive month. Meanwhile, input prices moderated in July, allowing firms to reduce their charges. Overall, IHS Markit analysts emphasized that, “growth in international trade was the sharpest in one-and-a-half years. With this in mind, goods producers continued to add to their payrolls, with employment growth accelerating to a 28-month high.”
Author: Luis Lopez Vivas, Economist