Employment in South Korea declines at sharpest pace since late-2008
Staff Writer |
The health of the South Korean manufacturing sector deteriorated in May, according to latest survey data.
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New order receipts from both domestic and foreign clients declined, leading to a fall in production.
Consequently, absent demand pressures motivated firms to cut staff numbers.
In line with the decline in operating conditions, business confidence eased to a seven-month low.
Nonetheless, firms increased selling charges at the fastest rate in four months amid greater input costs, particularly for oil and labour.
The headline Nikkei South Korea Manufacturing Purchasing Managers’ Index (PMI) – a composite single-figure indicator of manufacturing performance derived from five key survey indices – recorded 48.9 in May, up from 48.4 in April, to signal a third successive month of deteriorating business conditions in the South Korean manufacturing sector.
Although the latest decline was softer than that seen in the previous month, it was the second-greatest in 14 months.
As has been the case since March, survey data pointed to a decline in new order receipts during May.
According to panellists, demand was weaker due to increased competition and fewer sales to existing clients.
New work from overseas customers was also lower during the latest survey period.
That said, the rate of decline softened noticeably from April and was only fractional.
As a result of reduced new business inflows, South Korean goods producers cut back on output.
Due to lower production line requirements, staff numbers were reduced in May.
There were also reports that the minimum wage hike introduced this year had encouraged job cuts to help reduce labour costs.
The fall in employment was the fastest since December 2008.
Nonetheless, backlogs of work were cleared to a faster degree in the latest survey period.
The rate of depletion accelerated to the joint-quickest in a year-and-a-half (on a par with March).
Despite absent demand pressures, capacity constraints at suppliers were evidenced by a lengthening of average lead times.
In fact, vendor performance deteriorated to the greatest extent since September 2007 amid reports of raw material shortages.
Input prices were also reportedly impacted by shortages at suppliers.
Cost burdens increased for a tenth consecutive month in May.
Higher labour costs and greater raw material prices, particularly oil, were primarily linked to the rise in operating expenses.
That said, the rate of increase was the softest seen across the current bout of inflation.
In response, firms raised output prices to combat profit margin erosion.
The rate of charge inflation, albeit only moderate, was the fastest in four months.
Looking ahead, South Korean manufacturers remained optimistic towards output over the forthcoming 12 months in May.
Planned new product launches and forecasts of stronger demand were linked to upbeat sentiment.
That said, the degree of confidence was the lowest since October 2017 and eased for a fourth straight month. ■