South Korea plant activity growth slows as production declines for first time in 12 months

SEOUL (Reuters) – South Korea’s factory activity grew at a slower pace in August, as output contracted for the first time in 12 months and demand eased due to the surge coronavirus infections in the region and continued supply chain disruptions.

The IHS Markit Purchasing Managers Index (PMI) for August stood at 51.2, down from 53.0 in July, but remaining above the threshold of 50, indicating an expansion of the activity, for an 11th consecutive month.

“A further increase in viral infections and serious and lasting supply chain disruptions, particularly in the key semiconductor market, have weighed on operating conditions,” said Usamah Bhatti, economist at IHS Markit.

This has caused production levels to contract, while the resurgence of the coronavirus across the region has partially offset strong demand from major export markets such as the United States and Japan, Bhatti added.

The production sub-index stood at 49.1, closing the 11th consecutive month of expansion, rising from 53.5 a month earlier.

Total new orders rose again last month, but at the slowest pace in 10 months, while growth in export orders also slowed, as the highly contagious Delta variant and associated brakes hampered the release. global demand.

Still, companies increased their headcount for an additional month in preparation for incoming orders in the second half of the year.

At the same time, the investigation reported a further increase in the average cost charges of South Korean manufacturers due to the persistent shortages of raw materials, which caused product prices to rise.

“Companies generally noted that global shortages of raw materials and freight capacity, especially in the semiconductor market, had led to lower readings in the majority of indices,” Bhatti said.

“Still, companies remained confident that this would pass and that activity would increase over the next 12 months.”

The future output sub-index, which indicates business confidence, rose to 61.2 in August from 59.5 in July, in hopes of a broader economic recovery after the pandemic and bottlenecks in supply chain bottlenecks would ease.

(Report by Joori Roh)

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