South Korea factory activity shrinks in Dec 2024 as firms turn pessimistic
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Output shrank for the fourth consecutive month and new orders also fell, sub-indexes showed.
PHOTO: REUTERS
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SEOUL - South Korea’s factory activity contracted in December 2024, with manufacturers’ sentiment turning pessimistic for the first time since mid-2020 due to uncertainty over US trade policy and domestic politics, a private sector survey showed on Jan 2.
The purchasing managers’ index (PMI) for manufacturers in Asia’s fourth-largest economy, compiled by S&P Global, fell to 49 in December from 50.6 in November, slipping below the 50-mark that separates expansion from contraction for the third time since August.
Output shrank for the fourth consecutive month and the decline was steeper than the previous month, while new orders also fell, sub-indexes showed.
The deterioration in demand was linked to weaker client confidence in the domestic market, according to the survey, while export orders grew only marginally.
The gloom was reflected in manufacturers’ sentiment for the year ahead, which fell below the 50-threshold separating optimism and pessimism for the first time since July 2020 and marked the lowest in 4½ years.
Excluding the Covid-19 pandemic period, it was the worst since the data series began in April 2012.
In 2024, South Korean President Yoon Suk Yeol was impeached after his imposition of a short-lived martial law on Dec 3, raising political uncertainty and dampening consumer as well as business confidence.
“Downbeat expectations often stemmed from concerns surrounding domestic economic conditions, as well as potential US protectionist policies,” said Mr Usamah Bhatti, economist at S&P Global Market Intelligence.
US President-elect Donald Trump in 2024 pledged big tariffs on the United States’ three largest trading partners – Canada, Mexico and China – which are also expected to affect South Korean companies running factories in the countries.
In the latest survey, companies noted that overseas demand weakness in China and the US has offset improvements in Europe and some of the Asia-Pacific region.
The trade-reliant South Korean economy barely grew in the third quarter amid slowing exports. The country’s export growth is expected to slow to 1.5 per cent in 2025, from 6.3 per cent in 2024, according to the central bank. REUTERS
