In September, South Korea's manufacturing sector demonstrated a notable decline, driven by a reduction in output and new orders, as highlighted in a recent report. The seasonally adjusted manufacturing purchasing managers index (PMI) for South Korea fell to 48.3, down from 51.9 in August. This significant drop signifies a shift below the critical 50-mark, which typically indicates the transition from growth to contraction. Factory managers reported a sharp decline in new orders, marking the steepest rate of decrease in the past 15 months.
Moreover, export demand has officially entered contraction territory for the first time in 2024, reflecting broader concerns regarding global economic conditions. This downturn has led South Korean manufacturers to cut payrolls in September, resulting in the first reduction in factory employment experienced in five months. Inflationary pressures also exhibited a mild trend; input costs increased only minutely in September.
In response to these challenges, manufacturers opted to decrease charges to customers in hopes of attracting more business. This decision comes in light of cost inflation tapering off, prompting manufacturers to lower output prices for the first time in 13 months to stimulate sales. The outlook for the South Korean industrial sector has dimmed as manufacturers express growing concerns about a stagnant domestic and global economy.
Many industry leaders have pointed out that such economic conditions could further impact the manufacturing sector, with the overall sentiment trending pessimistically. The PMI, a vital economic indicator, is compiled from survey responses from 400 manufacturers during the period from September 9 through September 20.
This data underscores the challenges that the South Korean manufacturing sector faces ahead, making it crucial for stakeholders to monitor these developments closely..