Korea: Manufacturing activity stabilizes in April
May 3, 2016
Business conditions in Korea’s manufacturing sector improved in April, after having deteriorated in the previous three months. The Nikkei Purchasing Managers’ Index (PMI), which is published by Markit, edged up from 49.5 in March to 50.0 in April. Conditions in the manufacturing sector stabilized in April as the indicator stood at 50.0. A reading above this threshold indicates expansion in the sector, while a reading below suggests contraction.
The improvement in April reflected a slower pace of contraction in production. Firms reported that the contraction in output continued to signal weaker demand from abroad, against a backdrop of more challenging global conditions. Therefore, the sub-indicator of new orders from abroad decreased for the third consecutive month. Meanwhile, manufacturers increased their staffing levels in April, which offset the decrease registered in the previous month. Regarding price developments, April’s survey showed that input prices increased due to higher prices for oil and metals. The recent rally in commodities prices, particularly in energy commodities and base metals, is likely to add further pressure on prices in the coming months.
Regarding the improvement seen in April, Markit commented that, “this shows positive signs for the goods producing sector, and suggests that the official manufacturing production index will remain in positive territory.” Markit added that, “On a less positive note, inflationary pressures intensified to the greatest extent in over three years, amid reports of higher raw material costs. Moreover, companies were unable to compensate for greater cost burdens, as reports of increased competition and price negotiations from clients led firms to reduce their own charges further.”