South Korea February factory activity shrinks for eighth month

SEOUL  – South Korea’s factory activity contracted for an eighth month in February, a survey showed on Thursday, highlighting weak domestic and global economic conditions even though the downturn in output and orders eased slightly.

The S&P Global’s seasonally adjusted purchasing managers’ index (PMI) for South Korean manufacturers stood at 48.5 in January, unchanged from December and remaining below the 50-mark since July, 2022.

The 50-level separates expansion from contraction.

Sub-indexes showed output fell for a tenth month but at a slightly milder pace than a month before, while new orders shrank for an eighth month, with its pace also easing. New orders for exports fell for a 12th month, though the downturn eased from the previous two months.

“PMI survey data for February continued to depict subdued operating conditions in the South Korean manufacturing sector,” said Usamah Bhatti, economist at S&P Global Market Intelligence.

“On a more positive note, South Korean goods producers signaled softer albeit still sharp rises in prices midway through the first quarter.”

Soft domestic and global economic conditions and inflationary pressures, often caused by exchange rate weakness, were linked to subdued overall demand, according to the survey. Currency weakness was cited as a key driving force behind the latest drop in demand from overseas.

Reflecting weak demand, backlogs of work fell at the sharpest pace since July 2020, and stocks of finished goods jumped by the most since November 2007.

The input price inflation softened for a fourth month to the weakest level since November 2020. However, the rise in operating expenses remained sharp overall, largely pressured by a weak exchange rate and rising raw material prices.

At the same time, the rate of output price inflation also softened, with the latest increase the second-weakest in 27 months.

Manufacturers’ optimism about the future output over the coming year rose for a second month to the highest level in five months, helped by hopes of a domestic and global economic recovery.