South Korean manufacturing contracts for sixth month in January

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South Korea’s manufacturing sector had a sluggish start to the year, notching up its longest contractionary streak since 2015.

The pace of decline in the sector quickened, according to the Nikkei-Markit purchasing managers index, which fell to 49 in January from 49.4 in December. That saw it sitting below the expansionary threshold of 50 for a sixth consecutive month, the longest slump since the nine months from March to November 2015.

During this most recent contraction, the lowest reading was 47.6 in September.

Driving the deterioration in operating conditions were quicker falls in both output and new orders, Markit noted.

The data pointed to a quicker decline in production at goods manufacturers and said that, although marginal, the rate of contraction was quicker than the average over the course of last year. “According to panellists, unstable economic conditions and a fall in new work inflows led to a reduction in output January data pointed to a quicker decline in production at South Korean goods producers,” Markit said.

Amy Brownbill, economist at IHS Markit, added:

[C]ost inflationary pressures accelerated to a near-six year high, with many panellists blaming the unfavourable exchange rate as the key factor.

On a more positive note, the newly-released Future Output Index signalled strong optimism towards output growth over the coming year. In fact, business sentiment reached a seven-month high, suggesting firms are positive towards the outlook.

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