Business conditions improve marginally in South Korea
Staff Writer |
Latest data signalled a further improvement in operating conditions in the South Korean manufacturing sector.
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Growth in output and new business was sustained, while firms added to their payrolls at the quickest rate in 18 months.
That said, new business growth softened, enabling firms to clear backlogs of work and raise stocks of finished goods.
Delivery times by suppliers lengthened amid raw material shortages, which also contributed to increased input costs.
In turn, this prompted firms to raise selling charges.
The headline Nikkei South Korea Manufacturing Purchasing Managers’ Index (PMI) – a composite single-figure indicator of manufacturing performance derived from five key survey indices – dipped to 50.3 in February from 50.7 in January to signal a marginal improvement in business conditions for South Korean manufacturers.
A second successive month of expansion in output was observed during February.
Although the rate of growth was only slight and weaker than in the previous month, it was stronger than the series long-run average (50.2).
Panellists mentioned that production was boosted in line with higher new order intakes.
New business received by South Korean manufacturers increased for a ninth month in a row.
According to panellists, greater order book volumes were driven by both domestic and overseas clients.
That said, the pace of expansion was only marginal.
New export orders rose in February, with Australia, China and the US all mentioned as sources of external demand.
With expectations that output growth will be maintained, firms hired additional staff during February, thereby ending a five-month sequence of contraction in employment.
In fact, the rate of job creation, albeit slight, was the strongest observed since August 2016.
Increased staff levels in tandem with weaker new order growth enabled firms to reduce the amount of business outstanding, reversing the marginal accumulation seen in January.
Positive output projections also underpinned greater holdings of finished goods.
In line with increased production and new orders, South Korean manufacturers raised their input buying.
Purchasing activity has expanded in each of the past four survey periods.
Firms also mentioned that predictions of further raw material price hikes supported higher buying activity during the latest survey period.
Pressures on supply chains intensified, as evidenced by a seventeenth successive month of lengthening average lead times.
Raw material shortages and stronger demand were the main factors behind longer delivery times.
Firms were faced with another month of intensified cost pressures.
Input prices increased sharply, but to a softer extent than the one-year high seen in January.
Higher labour and raw material costs were associated with greater operating expenses.
In turn, output prices were increased moderately.
Lastly, businesses remained optimistic in February.
Firms linked planned new product launches and forecasts of economic growth to their confidence. ■