South Korean factory activity continues to grow amid supply and virus concerns Reuters

SEOUL (Reuters)-Driven by the steady expansion of production and new orders, South Korea’s factory activity in July increased for the 10th consecutive month, but supply chain disruptions continued to put pressure on manufacturers, and input and output prices rose.

The IHS Markit Purchasing Managers Index (PMI) in July was 53.0, down from 53.9 in June, but remained above the 50 mark, indicating that activities are expanding.

IHS Markit economist Usamah Bhatti said: “As production levels continue to expand, Korean manufacturers continue to report continuous improvement in operating conditions at the beginning of the second half of the year.”

The output sub-index was 53.5, the 11th consecutive month of expansion, which was higher than 53.3 a month ago.

In order to meet the increased production, the company continued to increase its staffing level for another month, although this was the lowest level in five months.

The total number of new orders and export orders have both increased for the 10th consecutive month, but the growth rate has slowed slightly compared to June, due to the highly contagious Delta variant and related restrictions that have weakened global demand.

Bhatti said: “Anecdotal evidence shows that COVID-19 cases across Asia have returned, and continued supply chain disruptions have slowed domestic and international market demand.”

Monday’s investigation revealed that raw material shortages and delivery delays continued, leading to further increases in input prices. This also puts the company under pressure to pass on higher costs to customers.

The input price sub-index hit the second highest in history, rising for the 13th consecutive month, while the price increase of output products hit a record high.

Looking ahead, companies remain optimistic in the next 12 months, as output and demand are expected to increase, and the launch of new products will further boost the industry, but the optimism index has dropped to a seven-month low.

“Continued supply chain disruptions and the resurgence of the virus have also contributed to weak business sentiment. Optimism is at its lowest level since December 2020, but overall it remains strong,” Barty added.