The activity of factories in S. Korea is accelerating but production and export demand are declining

SEOUL (Reuters) – South Korea’s plant activity expanded at its fastest pace in three months in December, but the economy struggled to pick up on the global rise in coronary virus cases and supply cuts weighed on production and foreign demand.

The IHS Markit Purchasing Managers ’Index (PMI) for the last month of the year rose to 51.9 from 50.9 in November, and for the 15th consecutive month was above the 50 threshold for the expansion of activity.

Monday’s survey showed that production in supply chain cuts continued to decline, with companies facing a shortage of semiconductor chips and weak demand, even though the pace was the lightest in three months.

New demand – which has the most weight in the PMI – grew at a faster pace as domestic demand conditions improved, offsetting slow foreign sales.

“Survey data showed that new export orders fell for the first time since September 2020, with companies blaming the rise in COVID-19 cases, port congestion and a lack of available shipping vessels,” said Joe Hayes, senior economist at IHS Markit.

Manufacturers continued to face high cost pressures, especially in the prices of oil, minerals and electronics, which led to customers paying higher charges.

The companies, however, continued to look forward to easing supply chain pressure in the coming year as global economic conditions improve and hopes to develop new products.

This led to a rise in recruitment, following the two months in a row after the job was cut, accelerating the growth rate to a six-month high.

However, economists say that the lack of supply should show a significant improvement in order to make a strong turn in manufacturing.

“Given South Korea’s leading role in the automotive and electronics industries, significant improvements in global supply chains will be needed before we can see a significant acceleration in manufacturing growth,” Hayes said.