By Jihoon Lee
SEOUL (Reuters) – South Korea’s factory activity shrank in February as employment declined at the sharpest pace in 2-1/2 years while confidence was hit by heightened uncertainty over economic conditions overseas and at home, a private survey showed on Tuesday.
The purchasing managers index (PMI) for manufacturers in Asia’s fourth-largest economy, released by S&P Global, fell to 49.9 in February, from 50.3 in January.
It was the fourth time in the last six months that the index has fallen below the 50-mark, which separates expansion from contraction.
“Another muted month of data provides evidence that domestic industrial activity remained subdued midway through the first quarter,” said Usamah Bhatti, economist at S&P Global Market Intelligence.
“The outlook for the coming months appears uncertain, as firms recorded the steepest decline in employment levels since July 2022. Confidence regarding the upcoming year was also relatively weak.”
The trade-reliant economy, which barely grew in the final quarter of 2024, faces headwinds from an escalating trade war among major countries, triggered by U.S. President Donald Trump’s tariff threats, while domestic demand has also been hurt by heightened political uncertainty.
Tuesday’s survey showed output and new orders rose in February only marginally, with both sub-indexes at 50.5. Still, that was a six-month high and three-month high for the sub-indexes, respectively.
The growth in new export orders was even milder, with the sub-index at 50.1. Among major markets, sales were stronger in the Asia-Pacific region, such as Japan, Vietnam and China, according to the survey.
The survey result comes after last week’s trade data showed South Korea’s exports barely grew in February.
Employment fell for the fourth straight month, as firms remained reluctant to hire amid muted demand. Stocks of input purchases fell for the first time in four months, while those of finished goods were depleted at the fastest pace in 3-1/2 years.
Although inflation in input prices eased in February from a 2-1/2-year high in January, output prices jumped at the sharpest rate in 15 months as factories passed through higher raw material costs.
South Korean manufacturers’ optimism for the year ahead weakened in February, undermined by concerns about a domestic recovery and political instability as well as global economic uncertainty.
(Reporting by Jihoon Lee; Editing by Shri Navaratnam)
