South Korea's Trade Activity Surge Eases Factory Slump

A prolonged slump in South Korean factory activity eased in July, with export orders rising for the first time in nearly one and a half years, according to a private business survey released on August 1, raising hopes for a more durable economic recovery.

S&P Global's purchasing managers index (PMI) for South Korean manufacturers increased to 49.4 in July from 47.8 in June on a seasonally adjusted basis.

The sub-50 reading indicated that activity continued to contract for the 13th month in a row, albeit at a much slower pace.

A sub-index for new export orders rose to 50.2, after 16 months below 50, with a rise in demand from key markets across the Asia-Pacific region and Europe, particularly for automotive goods and semiconductors, according to the survey.

That brought the decline in overall orders to the narrowest in 12 months, with the sub-index sharply up to 48.7 from 45.0, while output rose to 47.2 from 46.5.

"At the same time, firms took this as a signal to prepare for a gradual improvement in demand by hiring more people and increasing purchasing activity in July," said S&P Global Market Intelligence economist Usamah Bhatti.

Employment increased by the most in 17 months, and purchases increased for the first time in 12 months, while finished goods stocks fell by the most in 18 months, according to corresponding sub-indices.

Inflationary conditions improved as well, with input prices falling for the first time since June 2020, accompanied by the steepest drop in output prices since August 2020.