SEOUL, Dec 1 (Reuters) – South Korea’s factory activity contracted for a second straight month in November, as demand remained subdued, a private-sector survey showed on Monday, though a finalised trade deal with the United States brought some clarity for manufacturers.
The Purchasing Managers Index (PMI) for manufacturers in Asia’s fourth-largest economy, released by S&P Global, stood at 49.4 in November, unchanged from October and below the 50-mark separating expansion from contraction.
“Both production volumes and new orders fell for the second consecutive month, with anecdotal evidence indicating that weakness in the domestic economy was compounded by the impact of tariffs and price fluctuations,” said Usamah Bhatti, economist at S&P Global Market Intelligence.
New orders fell on domestic weakness and the effects of U.S. tariffs, although the pace of decline eased compared with October.
The drop in new export orders was marginal, as soft demand in the U.S. and Japan was offset by stronger orders from other Asian countries, such as India, Vietnam and Indonesia.
In November, South Korea finalised a trade deal with the U.S. to reduce tariffs, alleviating uncertainties after months of negotiations over an investment package that was included in a preliminary agreement in late July.
The Bank of Korea held interest rates steady for a fourth straight meeting last week, signalling an end to its monetary easing cycle amid worries over a weakened won.
Amid currency weakness, Monday’s survey highlighted quickening input price inflation in November, which accelerated to a nine-month high. However, firms refrained from passing on these higher costs to consumers, with output prices falling for the first time in a year due to weak demand.
Manufacturers’ optimism for the year ahead dimmed, reflecting persistent concerns over the timing of the country’s economic recovery, price volatility and intensifying competition.
(Reporting by Jihoon Lee; Editing by Jacqueline Wong)
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