HomeTop StoriesFactory activity in South Korea contracted in April, but optimism about the...

Factory activity in South Korea contracted in April, but optimism about the outlook is increasing

By Jihoon Lee

SEOUL (Reuters) – South Korea’s factory activity contracted again in April, but producer optimism rose to its highest level in almost two years as output and orders managed marginal growth, data showed on Thursday a survey in the private sector.

The purchasing managers’ index (PMI) for manufacturers in Asia’s fourth-largest economy, compiled by S&P Global, fell to 49.4 in April from 49.8 in March, on a seasonally adjusted basis.

It was the second month that the index had fallen below the 50 mark, which distinguishes between expansion and contraction, and the lowest reading since August 2023.

“While manufacturing and new orders returned to fractional growth territory, the PMI was weighed down by declining employment and declining purchasing shares,” said Usamah Bhatti, economist at S&P Global Market Intelligence.

“Falling employment, backlogs and inventories indicate that the sector still has a long way to go before growth can be sustained.”

South Korea’s economy grew at the fastest pace in more than two years in the first quarter, data showed last week, exceeding expectations thanks to a recovery in domestic consumption and robust exports.

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In the industrial survey, production and new orders sub-indexes rose to 50.1 and 50.3 respectively in April, after falling below 50 for the first time in three months in March.

New export orders rose for a fourth straight month in April on strong demand from mainland China and the broader Asia-Pacific region, but the pace was slightly slower than the previous month, the survey showed.

On the negative side, employment fell in April after eleven months of increases, while inflation in both input and output prices was the sharpest since November.

Still, producer optimism for the year ahead recorded the highest level since May 2022, as companies hoped for a sustained recovery in domestic and export orders, helped by new product launches and lower interest rates.

(Reporting by Jihoon Lee; Editing by Shri Navaratnam)

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