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Korea

Korea

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Published by: David4564654 on Nov 01, 2011
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11/15/2011

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HSBC
Purchasing Managers’ Index™ 
Press Release
Embargoed until: 09:00 (SEOUL), 1 November 2011
HSBC South Korea Manufacturing PMI
®
 
South Korean manufacturing sector conditions continue to deteriorate
Summary
South Korean manufacturing sector businessconditions deteriorated again in October. This washighlighted by the HSBC South Korea Manufacturing
PMI 
® 
posting 48.0. The latest reading pointed to athird successive worsening of business conditions inthe South Korean manufacturing sector. However, upfrom September’s reading of 47.5, the rate ofdeterioration slowed slightly.Manufacturers in South Korea reported a solidreduction in new business received during October.The rate of contraction was consistent with thatrecorded in the previous survey period. New ordersreceived from export markets also fell, but at a slowerrate. Overall, anecdotal evidence suggested thatsoftening global economic conditions had led to areduction in demand.Output contracted markedly in October, although therate of decline was slightly weaker than in September.Despite the fall in new business, backlogs of workrose marginally. This suggested that the drop in neworders had been weaker than expected. However,some panellists commented that initiatives to controlstocks, alongside lower new work intakes, had led tothe decrease in output. Subsequently, inventories ofpost-production goods were depleted.October data signalled an increase in employment inthe South Korean manufacturing sector. However, therate of job creation was only marginal, with themajority of respondents indicating that staffing levelswere unchanged since September.Purchasing activity decreased for a secondconsecutive month in October, in line with loweroutput requirements. However, the latest reductionwas only marginal. Despite this, a slight lengthening ofsuppliers’ delivery times was indicated. Stocks ofpurchases increased during October, suggesting thatpurchase volumes had exceeded requirements.However, the accumulation was only slight.Input prices continued to rise markedly in October. Therate of cost inflation slowed for a second successivemonth, but remained above the long-run trend. Higherraw material prices and unfavourable exchange ratevariations were reported to be the main drivers of costinflation. Output prices were unchanged sinceSeptember. Panellists commented that attempts to passon higher costs were offset by the need to keep chargeslow due to strong competition for new business.
Comment
Commenting on the South Korea Manufacturing PMIsurvey, Ronald Man, Economist at HSBC in Asia said:
“Whilst uncertainty still hangs over Europe, the story in Korea is clearer. Korea’s manufacturing sector remains on track for a soft landing. The rate of contraction in October has eased, with the PMI index heading back towards the 50 no-change level. No doubt, soft global demand will hold back new orders,but a tight labour market at home and resilient Chinese growth should help Korea’s manufacturing sector push through the fourth quarter.” 
Key points
 
PMI posts 48.0, pointing to moderate worseningof business conditions
 
Output and new orders both contract for thirdmonth running
 
Backlogs and employment rise
Historical Overview
 
343842465054586266702004 2005 2006 2007 2008 2009 2010 2011
Increasing rate of contractionIncreasing rate of growth50 = no change on previous month, S.Adj.
HSBC South Korea Manufacturing PMI
 

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