South Korea Manufacturing PMI Remains In Contraction - Markit

(RTTNews) - South Korea's manufacturing sector strengthened in December, the latest survey from Markit Economics revealed on Friday - although it remained barely in contraction with a four-month high score of 49.9.

That was up from 49.0 in November, but it remained just below the boom-or-bust line of 50 that separates expansion from contraction.

"Manufacturing conditions in Korea almost stabilized in December, driven by stronger new orders and employment. But output still contracted as manufacturers do not perceive demand as being sufficiently strong," said Ronald Man, Economist at HSBC in Asia.

Output decreased for the ninth month in a row, although at only a fractional rate. New orders, on the other hand, returned to growth for the first time in four months, alongside renewed job creation. Meanwhile, downward pressures on selling costs remained, amid reports of increased competition and lower raw material costs.

Incoming new orders rose at South Korean manufacturers in December, reversing the trend in the previous three months - thanks to new product developments and an increase in domestic sales.

Output and new export orders remained in negative territory for the ninth straight month - due largely to worsening international demand and foreign trade, with increased competition - particularly from China.

Despite output falling and dampened demand, payroll numbers rose for the first time in three months, although the volume of work outstanding declined in December. The quantity of purchases rose for the second successive month.

Stocks of pre-production goods continued to fall in December, reflecting low production requirements and weak market conditions.

Average cost burdens for South Korean goods producers remained unchanged in December, following a three-month period of input price falls. Output prices, meanwhile, declined for the fifteenth month running, amid reports of reduced raw material costs and increased price competition.

"Korea's PMI readings suggest that economic growth in Q4 2014 will be a touch weaker than the previous quarter. Therefore, we think an accommodative stance by policymakers in Korea is still warranted to support the recovery," Man said.