South Korean factory activity shrinks in April, but optimism about outlook rises

Written by Lee Jihoon

SEOUL (Reuters) – South Korean factory activity contracted again in April, but manufacturers’ optimism rose to the highest level in nearly two years as production and orders managed to record marginal growth. This was revealed in a private sector survey on Thursday.

The Purchasing Managers Index (PMI) for manufacturing in Asia’s fourth-largest economy, compiled by S&P Global, was a seasonally adjusted 49.4 in April, down from 49.8 in March.

This is the first time in two months that the index has fallen below 50, the dividing line between expansion and contraction, and the lowest level since August 2023.

“Production and new orders have returned to modest growth territory, but the headline PMI has seen a decline in employment and weighed on purchasing inventories,” said Osama Bhatti, economist at S&P Global Market Intelligence. .

“Lower jobs, backlogs and inventories suggest the sector still has a long way to go to sustain growth.”

Data last week showed South Korea’s economy grew at the fastest pace in more than two years in the first quarter, beating all expectations on the back of a recovery in domestic consumption and strong exports.

In the manufacturing industry survey, sub-indices for production and new orders rose to 50.1 and 50.3, respectively, in April after falling below 50 for the first time in three months in March.

New export orders rose for the fourth straight month in April, driven by strong demand from mainland China and the Asia-Pacific region, the survey showed, although the pace slowed slightly from the previous month.

On the negative side, employment fell in April after 11 months of increases, while input and output price inflation was the steepest since November.

Still, manufacturers are looking forward to a sustained recovery in domestic and export orders, supported by new product launches and lower interest rates, with manufacturers looking at their most optimistic outlook for the year ahead since May 2022. The highest value was recorded.

(Reporting: Lee Ji-hoon; Editing: Shri Navaratnam)

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