Korea: Manufacturing PMI edges up in October but still signals contraction
November 1, 2016
Manufacturing activity in Korea’s manufacturing sector began the fourth quarter of 2016 on a weak footing. The Nikkei Purchasing Managers’ Index (PMI) reported by IHS Markit inched up from 47.6 in September—a 14-month low—to 48.0 in October. Although the result suggests that the pace of contraction moderated at the outset of Q4, conditions in the sector remain in the doldrums since the indicator is firmly entrenched below the 50-threshold that separates expansion from contraction in the sector.
According to IHS Markit, manufacturing production declined for third consecutive month, reflecting a sharp decrease in new orders. As a result, Korean goods producers cut back on staffing numbers and, in fact, October’s jobs shedding in the sector was the quickest since January. On the price front, firms reported that cost burdens have increase, while firms’ charges continued to decrease due to rising competition. According IHS Markit analysts, “some survey respondents also mentioned the strikes at Hyundai creating uncertainty in the market.”
Author: Ricardo Aceves, Senior Economist