Factory activity in South Korea eased in December as companies turned pessimistic, PMI showed, according to Reuters
By Jihoon Lee
SEOUL (Reuters) – Factory activity in South Korea eased in December and manufacturers’ sentiment turned pessimistic for the first time since mid-2020 due to uncertainty over U.S. trade policy and domestic politics, a private sector survey showed on Thursday.
The purchasing managers’ index (PMI) for manufacturers in 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 contraction for the third time since August .
Production decreased for the fourth month in a row, and the decline was steeper than the previous month, and new orders also fell, the sub-indices show.
The deterioration in demand is linked to weaker client confidence in the domestic market, according to the survey, while export orders rose only slightly.
It reflected grimly on manufacturers’ sentiment for the coming year, which fell below the 50 threshold that separates optimism and pessimism for the first time since July 2020 and hit a 4-1/2-year low. Excluding the period 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 a short-lived martial law on December 3, heightening political uncertainty and denting consumer and business confidence.
“Low expectations often stemmed from concerns about domestic economic conditions as well as potential US protectionist policies,” said Usamah Bhatti, economist at S&P Global Market Intelligence.
US President-elect Donald Trump last year promised high tariffs on the United States’ three biggest trading partners – Canada, Mexico and China – which are expected to affect South Korean companies that operate factories in those countries.
In the latest survey, companies noted that weakness in overseas demand in China and the United States offset improvements in Europe and some parts of the Asia-Pacific region.
South Korea’s trade-reliant economy barely grew in the third quarter as exports slowed. The country’s export growth is expected to slow to 1.5% in 2025, from 6.3% in 2024, according to the central bank.
