SEOUL (Reuters) – South Korean factory activity shrank for a seventh straight month in January after sluggish global demand and a surge in the coronavirus outbreak in China, companies said Wednesday. A survey revealed.
Still, the pace of contraction was a little slower than in the previous month, and manufacturers were also seen as gearing up for a brighter future.
S&P Global’s seasonally adjusted Purchasing Managers’ Index (PMI) for South Korean manufacturing was 48.5 in January, slightly higher than December’s 48.2, but below the neutral 50 mark for the seventh straight month.
The 50 mark distinguishes between expansion and contraction. A higher level indicates a faster rate of change from one month ago.
New orders fell for the seventh month in a row in January, although the rate of decline slowed slightly from a month ago. The rate of contraction in new orders from overseas has also eased, but it is still the second fastest for the 11th straight month of decline.
Declining demand from international customers reflects rising COVID-19 cases in mainland China and the impact of rising interest rates on exchange rates, the study said.
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The sub-index also showed that production fell sharpest in three months and inventories of finished goods rose for the first time in four months, reflecting lower new orders.
“The near-term outlook for South Korea’s manufacturing sector looks grim,” said Usama Bhatti, an economist at S&P Global Market Intelligence.
“That said, businesses remain confident that global economic conditions will improve and demand will be stimulated,” he said.
Employment increased for the first time in five months and the fastest pace since March 2022. A panel of investigative her members attributed this to the start of hiring before new order growth picked up.
It also supported businesses, with the pace of input price increases softening to its weakest level since December 2020, and deterioration in supplier delivery times also eased significantly from last month when truckers were on strike.
Manufacturers’ optimism about future output next year improved significantly in January from a nearly two-and-a-half-year low in December to a four-month high.
Reported by Jihoon Lee.Edited by Kim Coghill
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