Korea's Manufacturing Index Improves Slightly

Korea’s HSBC manufacturing PMI for November improved to 50.4 from 50.2.
Output and new orders went nowhere, though export orders ticked higher.

Input price inflation climbed.

HSBC economist Ronald Man commented:

“Korea’s manufacturing conditions improved for the second consecutive month. Stronger employment growth will support household income and private consumption. But in the absence of even stronger output and new orders, the recovery will likely remain gradual. Therefore policymakers will likely maintain an accommodative stance for the time being. We expect the Bank of Korea to hold rates at 2.50%, before delivering a 25bp hike in 3Q 2014.”

Here’s the tale of the tape:

Full release:

The HSBC South Korea Purchasing Managers’ IndexTM (PMI®) — a composite indicator designed to provide a single-figure snapshot of the health of the manufacturing sector — rose marginally to 50.4 in November, up from 50.2 in October, signaling a slight improvement in operating conditions. Whilst the PMI posted only just above the 50.0 no-change mark

separating growth from contraction, this was nevertheless the highest reading in six months.

Output growth slowed to virtual stagnation in November, as the seasonally adjusted Index registered only fractional growth. That said, the Index posted above the 50.0 no-change mark for the second successive month, following a four-month sequence of readings signaling contraction. Respondents cited increased smartphone sales and improvements in the automobile industry due to the settlement of strikes as key drivers.

Like output, new orders also registered such meagre growth as to broadly indicate stagnation in November. Anecdotal evidence suggested the impact of an expansion in foreign demand, and consequent rise in new export orders, was tempered by a contraction of domestic demand.

Conversely, new export orders grew at a solid pace in November, though the rate of growth eased from October’s 31-month high. Some panellists attributed the latest increase to an expansion in demand in key foreign markets, such as China, South East Asia and Japan.

Like new orders from abroad, South Korean manufacturing employment bucked the trends seen in output, total new orders and backlogs, registering solid

growth in November. Payroll numbers rose at the sharpest pace since May, and a number of respondents attributed the latest increase to an expectation of higher production levels in 2014.

Anticipation of output growth in 2014 was similarly cited as a reason for higher purchasing activity in November. The quantity of purchases rose at the sharpest pace since April, with gains also linked by a number of

panelists to new export order growth.

Input prices rose at a moderate pace in November, following a marginal fall in October. A number of respondents attributed the latest month’s price inflation to increases in raw material importing costs. In contrast,

output prices fell for the second successive month, though the pace of decline eased marginally from October.

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