South Korea’s Factory Activity Declines Sharply

By Jihoon Lee
SEOUL (Reuters) – South Korea’s factory activity contracted at the sharpest pace in 15 months in September as overseas demand slowed for the first time this year, indicating a prolonged economic recovery.

The purchasing managers index (PMI) for manufacturers in Asia’s fourth-largest economy, compiled by S&P Global, stood at 48.3 in September on a seasonally adjusted basis, down from 51.9 in August.

The index fell below the 50-mark, indicating contraction for the first time in five months and recorded the lowest reading since June 2023.

Output and new orders shrank in September after gaining for five straight months, marking the steepest declines in 11 and 15 months, respectively.

Sluggish domestic demand was cited as a primary factor behind the fall in orders, alongside a noteworthy decline in new export business.

Export sales to China, Japan, India, and the United States weakened according to the survey.

“South Korea’s manufacturing sector faced a reversal in fortunes during September. The forward-looking picture also looks clouded in uncertainty,” said Usamah Bhatti, economist at S&P Global Market Intelligence.

South Korea’s economy unexpectedly shrank in the second quarter, experiencing its sharpest contraction since Q4 of 2022, with officials banking on exports to boost growth.

The survey also revealed that backlogs of work—a key indicator of near-term activity—fell the most in five months, while optimism for the year ahead dropped to the lowest level since December 2022.

Employment declined by the most in 1.5 years. In September, Samsung Electronics decided to cut its overseas workforce by up to 30%, and SK On announced voluntary redundancy programs aimed at job cuts.

On a positive note, inflation in input prices eased to the lowest since August 2023, while output prices fell for the first time in 13 months.