S.Korea factory activity contracts for third consecutive month

SEOUL South Korea's factory activity fell for a third consecutive month in September, and by the sharpest pace in more than two years, due to weakening global demand, a private sector survey showed on Tuesday.

The S&P Global purchasing managers' index PMI saw a slight fall to 47.3 in September from 47.6 in August, marking the third month in a row under the 50 mark that separates expansion from contraction.

The index declined for a fifth consecutive month and hit the lowest level since July 2020, indicating the sharpest contraction in 26 months.

Output decreased for a fifth month and the most since June 2020, with some companies also affected by a Typhoon that hit industrial areas of South Korea, according to the survey.

The subindexes showed new orders fell for a third consecutive month and exports decreased for a seventh month, although both declines were smaller than the previous month. The survey noted that there were signs of declines in the semiconductor industry as deteriorating demand for goods curtailed the chip sector.

The challenges from weaker demand were worsened due to continued easing of supply chain bottlenecks and price pressure.

Suppliers' delivery times worsened by the least since January 2020, while input and output prices went down by the slowest since early 2021.

Joe Hayes, senior economist at S&P Global Market Intelligence, said that the immediate outlook for the South Korean manufacturing sector appears to be bleak.

External factors such as the weakening global economy will challenge goods producers' order books and keep pressure on the won - causing inflation to go up as the dollar benefits from its safe haven status. The optimism over the coming year was still high, but the level of optimism fell for the fourth month to the lowest since October last year.