South Korea’s Dec factory activity slows as firms turn pessimistic, PMI shows Via Reuters

Written by Jihoon Lee

SEOUL (Reuters) – South Korean factory production contracted in December, with producer sentiment turning pessimistic for the first time since mid-2020 due to uncertainty over U.S. trade policy and local politics, a private sector survey showed on Thursday.

The Purchasing Managers Index (PMI) for Asia’s fourth largest economy, compiled by S&P Global, fell to 49.0 last month from 50.6 in November, slipping below the 50 mark that separates expansion from contracted for the third time since August.

The result decreased for the fourth month in a row and the decline was stronger than the previous month, when new orders also fell, the index showed.

The decline in demand was linked to weak consumer confidence in the domestic market, according to the survey, while export orders grew slightly.

The gloom was reflected in manufacturers’ sentiment for the coming year, which fell below the 50 basis points separating optimism and pessimism for the first time since July 2020 and marked a 4-1/2-year low . With the exception of the COVID-19 pandemic, it was the worst since the data series began in April 2012.

Last month, South Korean President Yoon Suk Yeol was impeached after he imposed temporary martial law on December 3, raising political uncertainty and damaging consumer and business confidence.

“Expectations for the decline are mostly due to concerns related to domestic economic conditions, as well as US security policies,” said Usamah Bhatti, an economist at S&P Global Market Intelligence.

US President-elect Donald Trump last year pledged massive tariffs on three of the US’s biggest trading partners – Canada, Mexico and China – which are also expected to hit factories. of South Koreans operating factories abroad.

In a recent survey, firms noted that the weakness of overseas demand in China and the United States was a slight improvement in Europe and other Asia-Pacific regions.

South Korea’s trade-dependent economy did not grow in the third quarter amid a slowdown in exports. External growth is expected to slow to 1.5% in 2025, from 6.3% in 2024, according to the central bank.