South Korean manufacturing conditions deteriorate at sharper pace in September

South Korea’s manufacturing conditions declined at quite a sharper rate in September. The headline Nikkei South Korea Manufacturing PMI dropped to 47.6 in the month from the previous month’s 48.6, indicating a sharper deterioration in the manufacturer’s operating conditions. The September reading was the lowest in 14 months and added to the softest quarterly average since the third quarter of 2015, noted Markit.

South Korean goods producers’ output dropped at the sharpest pace since August 2015. The panellists noted that weakened demand, delays in the development of new products, strikes at several automobile firms and a tough economic climate added to the output contraction.

Moreover, a sharp fall in new orders also contributed to the significant decline in production. The pace of decline was the most rapid in 15 months. According to the data, the contraction in international demand was mainly responsible for the overall fall in total new orders as new export orders declined at the most noticeable rate in more than three years. Several survey respondents stated unstable global economic conditions and lowered trade volumes with China.

As a consequence of deteriorating operating conditions, manufacturers cut back their staff numbers for the first time since March. Companies commented on the restructuring of the labor force as a factor leading to job losses, noted Markit. Producers of goods in the country also cut their input buying, resulting in a further depletion in volumes of preproduction items.

With regard to price, lower raw material costs coming from the recent appreciation of the KRW resulted in a decline of input prices. This allowed companies to cut their charges to the biggest extent in five months. According to panellists, pressure from clients and attempts to stimulate sales are also the factors resulting in decline in selling prices.