SEOUL (Reuters) – South Korea’s manufacturing activity shrank at the sharpest pace in more than a decade in May, as worldwide lockdowns continued to weigh on demand and production, dashing hopes of a near-term recovery from the coronavirus crisis.
The IHS Markit purchasing managers’ index (PMI) edged down to 41.3 in May, the lowest since January 2009 and below 41.6 in April.
The headline reading stood below the 50-mark threshold that separates contraction from expansion for a fifth month.
Gauges for total new orders and export orders edged up slightly but remained in a deep slump as extended lockdowns to contain the virus doused demand.
A Reuters poll predicted a 22.1% plunge in May exports. Preliminary trade data will be released on June 1.
Factory production fell at the second-fastest pace on record.
“Output and new orders continued to sink at rates not seen since the global financial crisis … The export component of the survey also showed another unprecedented monthly decline in overseas demand,” IHS Markit economist Joe Hayes said.
Employment shrank for a 13th straight month and at its fastest pace on record amid restructurings, voluntary resignations and retirements.
Businesses remained pessimistic as firms worried about a global recession and slow recovery.
“The speed at which the global economy, and in turn, global trade, can recover will be a key determinant to the strength of South Korea’s recovery,” Hayes said.
“At this stage, however, it seems unlikely that conditions will allow for a robust pick-up in demand any time soon.”
On Thursday, the central bank cut interest rates to a record low and downgraded its 2020 economic projection to a 0.2% decline, which would be the biggest contraction since 1998.
The government is preparing for a third supplementary budget.
(Reporting by Joori Roh; Editing by Kim Coghill)
