South Korea‘s factory activity shrank in July for the first time in nearly two years, as production and new orders weakened amid persistent inflation and a supply chain crisis, a private sector survey showed on Monday.
The S&P Global Purchasing Managers’ Index (PMI) fell to a seasonally adjusted 49.8 in July, from 51.3 in June to below 50 for the first time since September 2020. The 50-point mark separates expansion from contraction in factory activity from the previous month.
Production fell for the fourth month in a row and at the fastest rate since October 2021, as new orders fell for the first time in 22 months and overseas arrivals for the fifth month in a row.
“South Korean manufacturers reported that strong inflationary pressures and sustained supply chain disruption had hindered production and demand at the start of the third quarter,” said Usamah Bhatti, an S&P Global Market Intelligence economist.
“Higher prices for inputs including fuel, metals and semiconductors meant that the disruption was broad-based across the manufacturing sector.”
There were, however, signs of price pressure peaking out. The rising pace of input and output prices softened to the slowest in four months and seven months, respectively.
Suppliers’ delivery times, which show the disruption, deteriorated by the least in four months. Manufacturers remained optimistic over the coming year for output, but the level of optimism was the weakest since October last year.