Korea PMI March 2017

Korea

Korea: Manufacturing PMI edges down in March as firms shed jobs at fastest pace since 2008

April 3, 2017

Korea’s manufacturing economy weakened in March amid reports that shipments to China had been affected by the recent diplomatic row surrounding the deployment of a U.S. anti-missile system on Korean soil. The Nikkei Purchasing Managers’ Index (PMI) reported by IHS Markit edged down to 48.4 in March from 49.2 in February, the lowest reading in four months. The indicator is now further below the 50-point threshold that separates contraction from expansion in manufacturers’ business conditions.

According to IHS Markit, operating conditions in the manufacturing sector declined at a faster rate in March, weighed down by lower demand from both at home and abroad and a further decline in output. Overseas demand was reported to have suffered from lower Chinese appetite for Korean goods, which was partially offset by increased sales to Japan and other countries in the region. Subdued production prompted firms to reduce their purchasing activity, which allowed them to work through existing inventories. Reduced output has seen excess capacity mounting in recent months, which, coupled with business confidence taking a dip in March, led firms to reduce their staffing levels at the fastest pace since the financial crisis in March. Nonetheless, supply shortages continued to feed cost-inflation pressures, encouraging manufacturers to pass higher prices onto customers. Output prices actually rose at the highest rate on record.

This is not good news for Korean households. On this, Senior Economist at IHS Markit Paul Smith comments: “The survey also provides little cheer for households, with companies choosing to pare back jobs to the greatest extent in over eight years while ongoing cost pressures mean that charges are being raised markedly at a time when demand is waning.”

FocusEconomics Consensus Forecast panelists expect fixed investment to expand 3.5% in 2017, which is unchanged from last month’s forecast. In 2018, the panel expects growth in fixed investment to grow 2.5%.


Author:, Economist

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