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Manufacturing in South Korea improve to greatest extent in 55 months

Staff Writer | December 5, 2017
Business conditions in the South Korean manufacturing sector improved to the greatest extent since April 2013 in November.
Manufacturing South Korea
South Korea   Nikkei South Korea Manufacturing PMI
Firms boosted production at the fastest rate since February 2015 amid the joint-quickest expansion in new orders for 55 months.

There were still signs of weakness externally however, with new export orders broadly unchanged from October.

Input price inflation softened, but remained sharp overall.

Supportive demand conditions spurred on businesses to raise output prices and pass on higher costs to consumers.

A positive business environment coincided with the highest degree of optimism since April 2016.

South Korean manufacturers’ confidence was linked to planned production line improvements and forecasts of new business wins from abroad.

The headline Nikkei South Korea Manufacturing Purchasing Managers’ Index (PMI) – a composite single-figure indicator of manufacturing performance derived from five key survey indices – increased to 51.2 in November from 50.2 in October.

The headline figure signalled a modest improvement in the health of the manufacturing sector.

That said, it was the sharpest expansion since April 2013.

Orders placed with South Korean manufacturers increased at the joint-fastest rate for 55 months in November, on a par with September this year and August 2014.

Panellists associated higher business inflows with new customer wins.

However, there was evidence to suggest that higher demand was underpinned by the domestic market, as new export orders were broadly unchanged from the previous month.

To accommodate for growth in new work, firms boosted production at the strongest rate for 33 months.

Nikkei South Korea Manufacturing PMI 35 40 45 50 55 60 65 70 20042005200620072008200920102011201220132014201520162017 Increasing rate of contraction Increasing rate of growth 50 = no change on previous month, S.Adj. Sources: Nikkei, IHS Markit Improved demand conditions led to an accumulation of backlogs of work for a third month in succession.

That said, this did not encourage firms to raise employment.

As has been the case since September, South Korean manufacturing firms cut payroll numbers.

On the price front, input cost inflation was sharp, despite easing slightly since October.

Survey respondents widely reported raw material price hikes, particularly for oil and metals.

Consequently, firms passed on part of the increased cost burden to customers.

Output price inflation quickened to an eight-month high.

Despite greater input costs, businesses were encouraged to increase input buying due to higher inflows of new work.

Purchasing activity increased at the joint-quickest pace in 55 months, on a par with January 2014.

As a result of greater demand and rising input prices, South Korean manufacturing companies were less cautious about pre-production inventory levels in November.

Input stocks were accumulated at the fastest rate since December 2008.


 

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