Korea: Manufacturing PMI slumps to over one-decade low in March
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) sank to 44.2 in March from 48.7 in February, moving further below the 50-threshold that separates an improvement from a deterioration in the manufacturing sector over the previous month.
March’s print was driven by the sharpest fall in output in over 11 years, due to both supply and demand-side disruptions hampering production schedules. On the supply-side, input delivery times increased notably as air freight issues, material shortages, and factory shutdowns in China constricted Korean manufacturers’ ability to acquire key inputs. Moreover, demand-side issues were driven by weaker domestic and foreign demand, mainly concentrated in the automotive sector. As a result, employment levels declined at the sharpest pace since December 2008, while business confidence hit a series record low in March.
On the price front, firms slashed output prices, and input prices increased, albeit at a softer pace in March.
Covid-19 spreading globally has raised significant concerns over demand prospects, despite a robust containment effort domestically. In the near-term, Korea’s export-dependent economy will likely remain hampered by depressed economic activity in major economies such as Japan, China and the U.S. until the pandemic subsides.
Looking for a bright spot in March’s result, Joe Hayes, IHS Markit economist, noted:
“On a positive note, there were sparse mentions of outright factory shutdowns. South Korea’s success in suppressing the spread of COVID-19 increases the chances of the domestic economy recovering at a quicker rate than otherwise.”