By Jihoon Lee
SEOUL (Reuters) – Factory activity in South Korea contracted in December, with manufacturer sentiment turning pessimistic for the first time since mid-2020 due to uncertainty over U.S. trade and domestic politics, a survey in the US showed on Thursday private sector.
The purchasing managers’ index (PMI) for manufacturers in Asia’s fourth-largest economy, compiled by S&P Global, fell to 49.0 last month from 50.6 in November, falling below the 50 mark that growth represents for the third time since August. from shrinkage.
Output shrank for the fourth month in a row and the decline was steeper than the previous month, while new orders also fell, sub-indexes showed.
According to the study, the deterioration in demand was related to weaker consumer confidence in the domestic market, while export orders grew only marginally.
The gloom was reflected in producer sentiment for the year ahead, which fell below the 50 threshold, which separates optimism from pessimism, for the first time since July 2020 and was the lowest in four-and-a-half years. Excluding the period of the COVID-19 pandemic, this was the worst since data series began in April 2012.
Last month, South Korean President Yoon Suk Yeol was ousted after imposing a short-lived martial law on December 3, increasing political uncertainty and dampening confidence among both consumers and businesses.
“Gloomier expectations often stemmed from concerns about domestic economic conditions, but also from possible protectionist policies by the US,” said Usamah Bhatti, economist at S&P Global Market Intelligence.
Newly elected US President Donald Trump last year pledged high tariffs on the United States’ three largest trading partners – Canada, Mexico and China – which are also expected to impact South Korean companies that operate factories in these countries.
In the latest survey, companies noted that weakness in overseas demand in China and the United States was offset by improvements in Europe and part of the Asia-Pacific region.
South Korea’s trade-dependent economy barely grew in the third quarter, while exports slowed. The country’s export growth is expected to slow from 6.3% in 2024 to 1.5% in 2025, according to the central bank.
(Reporting by Jihoon Lee; Editing by Shri Navaratnam)
