S. Korea factory activity extends downturn, but decline in new orders eases

By Jihoon Lee

SEOUL (Reuters) – South Korea’s factory activity contracted for the sixteenth straight month in October amid persistently weak demand, a private survey showed on Wednesday, but the rate of declines in output and new orders eased slightly in a boost to confidence.

The purchasing managers index (PMI) for South Korean manufacturers, compiled by S&P Global, edged lower to 49.8 in October on a seasonally adjusted basis, compared with 49.9 in September.

The index has stayed below the 50-level, which separates expansion from contraction, since July 2022.

“PMI survey data for October indicated that operating conditions in the South Korean manufacturing sector remained muted at the start of the fourth quarter of 2023,” said Usamah Bhatti, economist at S&P Global Market Intelligence.

“That said, the rate of deterioration was only fractional, amid softer reductions in both output and new orders.”

New export orders shrank for the third consecutive month, but the pace was milder than the month before. Still, demand was muted in key export markets such as mainland China and Japan, according to the survey.

The decline in backlogs of work, which fell for the 12th straight month, was the softest in the streak, as firms completed existing workloads amid subdued demand.

An acceleration in inflation underlined the broader pressures in the factory sector, with input prices rising at the fastest rate in ten months pushed up by higher raw material prices and a weaker local currency.

During October, global markets and policymakers have had to suddenly contend with the Middle East conflict and its implications for the price of oil and overall inflation.

Manufacturers’ optimism for the future, however, strengthened last month even though firms were still concerned about the timing of any recovery in demand.

(Reporting by Jihoon Lee; Editing by Shri Navaratnam)