Korea: The manufacturing sector shows signs of continued expansion in February, despite slowdown
March 2, 2018
The manufacturing sector signaled a second consecutive month of expansion in February, albeit less than in January. The Nikkei manufacturing Purchasing Managers’ Index (PMI), reported by IHS Markit, ticked down to 50.3 in February from 50.7 in January. Despite the downtick, the index still came in above the 50-point threshold that separates expansion from contraction in the manufacturing sector.
Manufacturers reported an increase in output and new orders in February—albeit at a slower pace than in the prior month—with greater new orders stemming from both domestic and overseas demand. This encouraged businesses to hire additional staff in February—for the first time in six months—and the increased headcount helped to reduce outstanding work. Meanwhile, to keep up with higher output and due to concerns over higher input prices in the future, businesses increased their purchasing activity in February. Because of this, supply chains were squeezed and for the seventeenth consecutive month there was a lengthening of average lead times in February.
In terms of price developments in February, input prices increased—albeit at a slower pace than in January—partly due to increased labor and raw material expenses. This lead to an increase in output prices. Commenting on how these developments may have affected businesses’ bottom lines, Joe Hayes, Economist at IHS Markit, said:
“Weaker growth in new orders may have caused firms to question the resilience of their customers to higher output charges. Selling price inflation eased, while input prices increased sharply, indicating tighter profit margins.”
Author: Edward Gardner, Economist