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South Korea October factory activity grows at fastest pace in over two years - PMI

·2-min read
A worker works at a plant of Hyundai Motor in Asan
A worker works at a plant of Hyundai Motor in Asan

SEOUL (Reuters) - South Korea's factory activity expanded at the fastest pace in more than two years in October, a private-sector survey showed on Monday, as global demand picked up from its coronavirus slump.

The IHS Markit purchasing managers' index (PMI) jumped to 51.2, from 49.8 in September, the first expansion in 10 months and the highest reading since September 2018.

The 50-mark threshold separates growth from contraction.

That reflected the rise in major sub-indexes, with factory production and new orders logging their sharpest growth since April 2013. New export orders returned to growth for the first time in nine months, albeit at a subdued level.

"October data marks a clear improvement in South Korea's manufacturing sector ... outright expansions in both output and new orders were registered, with both rising at their fastest paces in seven-and-a-half years," said Usamah Bhatti, economist at IHS Markit.

"Furthermore, the sector was bolstered by a return to expansion in overseas demand ... firms signalled increasing demand in key export markets such as the U.S. and China," Bhatti added.

Anecdotal evidence from some companies, however, showed continued disruption from Europe and Japan was dampening the pace of expansion.

Last week, France and Germany ordered their countries back into lockdown, while several economies including the United States set new records for daily infections in recent days.

Meanwhile, the survey showed employment continued to shrink for an 18th straight month, though at a softer pace, as firms did not replace voluntary leavers.

Looking forward, businesses were more confident in October, with the degree of optimism rising to its highest since January on hopes of stronger production, product development and the economic recovery.

"This positive outlook chimes with the IHS Markit forecast for industrial production to grow by 3.5% in 2021," Bhatti said.

(Reporting by Joori Roh; Editing by Sam Holmes)