Aerial view of Seoul, the capital of South Korea, at sunset.
Tobias She | Electronic+ | Getty Images
South Korea’s factory activity shrank by the most in 15 months in September as overseas demand slowed for the first time this year, a private survey showed on Wednesday, pointing to a slow path to a full economic recovery.
The manufacturing purchasing managers’ index for Asia’s fourth-largest economy, compiled by S&P Global, came in at a seasonally adjusted 48.3 in September, down from 51.9 in August.
The index fell below the 50-mark for the first time in five months, recording its lowest reading since June 2023.
Production and new orders shrank in September after growing for five consecutive months, recording their biggest declines in 11 and 15 months respectively.
The survey showed that sluggish domestic demand was the main reason for the decline in orders, but new export business also fell for the first time this year.
Specifically, export sales to China, Japan, India and the United States weakened, the survey showed.
“South Korea’s manufacturing sector faced a reversal of fortunes in September. The forward outlook also looks shrouded in uncertainty,” said Usama Bhatti, an economist at S&P Global Market Intelligence.
South Korea’s economy unexpectedly shrank in the second quarter, recording its worst contraction since the fourth quarter of 2022, with officials counting on exports to help support economic growth.
The survey showed that the backlog of work, an indicator of recent activity, fell by the most in five months, while optimism about the year ahead weakened sharply to its lowest level since December 2022.
The employment rate also saw its largest decline in 1-1/2 years. In September, the country’s technology giant Samsung Electronics decided to cut its overseas workforce by up to 30%, and battery company SK On announced a voluntary layoff plan aimed at cutting jobs.
The good news is that input price inflation slowed to its lowest level since August 2023, while output prices also fell for the first time in 13 months.
