South Korea’s Manufacturing Activity

By Jihoon Lee

SEOUL (Reuters) – South Korea’s factory activity expanded for the third consecutive month in July, but at a slower pace due to weak domestic demand affecting output and new orders, according to a private-sector survey released on Thursday.

The purchasing managers index (PMI) for manufacturers in Asia’s fourth-largest economy, compiled by S&P Global, was 51.4 in July on a seasonally adjusted basis, down from a 26-month high of 52.0 in June.

The index remained above the 50-mark, indicating expansion for the third month in a row.

Both output and new order volumes increased, albeit at softer rates, as firms reported that muted domestic demand restricted stronger growth. Usamah Bhatti, economist at S&P Global Market Intelligence, noted, “Firms were more optimistic regarding the year-ahead outlook for output, hoping that the uplift in international demand would translate into the domestic economy and boost demand further.”

Output and new orders experienced growth for the fourth consecutive month, although their pace slowed to three-month lows. Respondents pointed out that a subdued domestic economy had partially impacted overall client demand.

New export orders saw an increase for the seventh month in a row, with the growth rate only slightly declining from a five-month high reached previously. The survey suggested improved export order volumes in crucial markets, particularly the United States, Japan, and Southeast Asia.

Despite a surprising contraction in the second quarter after robust growth in the first quarter, consumer sentiment appeared to improve this month, alleviating some concerns about the economy’s uneven recovery.

Additionally, the PMI survey revealed that manufacturers’ optimism for the year ahead rebounded in July after hitting a six-month low in June, as firms anticipated acceleration in demand growth.