Korea: Manufacturing PMI inches down in May following weak Chinese demand
June 1, 2017
Korea’s manufacturing economy deteriorated in May because export volumes to China remain under pressure due to political tensions around the deployment of a U.S. anti-missile system on Korean soil. The Nikkei manufacturing Purchasing Managers’ Index (PMI) reported by IHS Markit decreased slightly from 49.4 in April to 49.2 in May. The manufacturing PMI has been below the crucial 50 point mark, which separates economic expansion from contraction, for 10 consecutive months. May’s headline figure suggests continuing deterioration in operating conditions among manufacturers in Korea.
May’s reading included the greatest decline in output since November 2016. Respondents blamed underwhelming levels of new business for the drop. Input costs decreased in April as international commodity prices remained low, leading to a modest drop in output prices. Respondents also cited that output prices were lowered to spur demand. Weakness in demand from China weighed down on new export orders, which fell for the 12th consecutive month. Subsequently, manufacturers reduced their staffing levels for the ninth consecutive month but May’s reduction was marginal and the weakest since January. Lower new orders enabled manufacturers to work through existing orders, but purchasing activity continued to fall in May. Paul Smith, Senior Economist at IHS Markit, commented that “wider industrial production will trend towards stagnation in Q2 following an unexpectedly strong start to the year.”
Author: Jan Lammersen, Economist