A reading below signals contraction in the industry.
Key points from Markit:
- Production and new orders fall sharply
- Backlogs decline at survey-record pace
- Input prices fall at fastest rate since November 2006
Weak economic conditions forced a sharp contraction in new orders for Korean goods. In turn, further deterioration in Korea’s manufacturing sector calls for more support from policy makers. On the monetary front, we expect the Bank of Korea to deliver one more 25bp policy rate cut this quarter. On the fiscal front, greater government spending should be allocated towards sustaining employment growth, especially in light of the recent slowdown in household consumption.
Economists watch Korean economic data extremely closely because it is highly correlated to the economic data that comes out of the emerging markets in mainland Asia.