South Korea factory activity slumps into longest downtrend since early 2009

SEOUL – South Korea’s factory activity shrank for an 11th consecutive month in May, slumping into its longest downtrend in 14 years, a survey showed on Thursday, as a slowing global economy hit output and orders and ratcheted up pressure on manufacturers.

The S&P Global’s seasonally adjusted purchasing managers’ index (PMI) for South Korean manufacturers stood at 48.4 last month, slightly up from 48.1 in April.

It has remained below the 50 mark that separates expansion from contraction since July 2022, the longest such streak since early 2009.

“The deterioration in South Korean manufacturing conditions was sustained during May as production, new orders and exports remained in contraction territory,” said economist Usamah Bhatti at S&P Global Market Intelligence.

“The two largest components of the headline reading fell at a sharper rate in the latest survey period as firms continued to battle challenging market conditions,” Mr Bhatti said.

Sub-indexes showed that output shrank for the 13th month and new orders fell for an 11th month. The fall in new export orders for the 15th month, however, was the softest in the streak.

There were a few improvements, too, in business conditions and from employment to inflation and future outlook.

Employment increased by the most since March 2022, while input prices rose at their slowest pace since September 2020, with output prices falling for the first time since then.

The survey noted that firms cited both an effort to stimulate sales and lower raw material prices as reasons for the fall in selling prices.

Suppliers’ delivery times also shortened by the greatest since April 2016, another positive sign on the supply chain front.

But manufacturers’ optimism for future output rebounded in May from a four-month low in April, hitting the highest level since September 2022.

Separate data on Thursday showed that South Korea’s exports fell for an eighth straight month in May in annual terms, although less than expected,

amid persistent weakness in demand for semiconductors.

Overseas sales fell 15.2 per cent year on year to US$52.24 billion (S$70.6 billion) in May, the Trade Ministry data showed, compared with a drop of 14.3 per cent in April.

The downwards streak is the longest run of year-on-year losses since January 2020.

Exports of semiconductors, South Korea’s biggest selling item, slumped 36.2 per cent, extending losses to a 10th consecutive month but an improvement versus April’s 41 per cent drop. REUTERS