Korea PMI August 2017


Korea: Manufacturing PMI signals marginal contraction in August

September 1, 2017

Korea’s manufacturing sector remained in contractionary territory in August, but the rate at which operating conditions worsened was marginal. The Nikkei manufacturing Purchasing Managers’ Index (PMI) reported by IHS Markit edged up from a four-month low of 49.1 in July to 49.9 in August. As a result, the index is now only fractionally below the crucial 50-point threshold that separates economic contraction from expansion, where it has been for 12 of the last 13 months.

The August report showed manufacturing production declining, but at a softer pace than in the previous month. New orders growth was modest in the month, but reflected new export business growth for the first time since January. Lower output requirements saw firms reducing their purchasing activities, with stocks of raw materials and other pre-production inventories dwindling in August. However, firms continued to hire new staff as expectations of future output volumes remained upbeat. Nonetheless, backlogs of work declined for a second consecutive month in August as operating capacity was freed up. Meanwhile, input prices rose as a result of a weaker Korean won and higher raw material prices. Due to still-subdued demand, firms were unable to roll these costs over to customers.

FocusEconomics Consensus Forecast panelists expect fixed investment to expand 7.0% in 2017, which is up 0.7 percentage points from last month’s forecast. In 2018, the panel expects fixed investment to grow 2.2%.

Author:, Economist

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Korea PMI Chart

Korea PMI August 2017 1

Note: Nikkei Korea Purchasing Managers’ Index (PMI). A reading above 50 indicates an expansion in business activity while a value below 50 points to a contraction.
Source: Nikkei and IHS Markit

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