The South Korean manufacturing sector is currently grappling with a decline in new orders and a slowdown in production, while simultaneously facing rising inflationary pressures as reported by S&P Global. This troubling trend was highlighted in their December findings, which marked a significant downturn in optimism among industrial managers.
The sentiment recorded was the lowest observed since 2012, barring specific months during the COVID-19 pandemic. In December, the seasonally adjusted Purchasing Managers' Index (PMI) for South Korea's manufacturing dropped to 49.0, down from 50.6 the previous month. This contraction below the neutral score of 50 serves as a clear indicator of ongoing challenges faced by the sector.
S&P Global's analysis pointed out that the recent PMI reading reflects a further deterioration in the health of manufacturing, with three out of the last four months showing a decline. Particularly alarming is the reported decrease in factory output, which continued to decline towards the end of the year.
The data reveals a steeper drop in production levels, as manufacturers indicated a moderate fall in output throughout December 2024. This marks four consecutive months of production declines, suggesting a troubling trend in the sector. New orders also weakened in December, primarily due to soft domestic demand, which has been closely tied to declining client confidence within the local market.
Although there was a marginal increase in offshore orders, this was not sufficient to counterbalance the dips in demand domestically, especially with the current softness in the Chinese and U.S. markets. Additionally, the sentiment recorded among South Korean manufacturing managers in December represented a record low, especially when viewed through the lens of historical data since 2012.
This was further exacerbated by growing concerns about rising U.S. protectionism, which manufacturers believe could impact future trade. In the face of these production challenges, South Korean manufacturers are also contending with increasing prices. Inflationary pressures have intensified, with input price inflation escalating to a five-month high at the end of December, indicating that the overall economic climate remains uncertain. The South Korea Manufacturing PMI was carefully compiled by S&P Global, based on responses from 400 manufacturers between December 5 and December 13.
This comprehensive survey outlines the difficulties the manufacturing sector is facing and the economic implications that lie ahead for the industry as we move into the new year..