May 2, 2018 / 12:40 AM / 2 months ago

South Korea factory activity contracts at faster pace in April as orders fall

SEOUL (Reuters) - Factory activity in South Korea contracted for a second month in April as output and new orders shrank at a faster pace, a private manufacturing survey showed on Wednesday.

FILE PHOTO: Employees work at an assembly line of GM Korea's Bupyeong plant in Incheon, South Korea March 29, 2018. REUTERS/Kim Hong-Ji/File Photo

The Nikkei/Markit purchasing managers’ index (PMI) on operating conditions for the manufacturing sector fell to 48.4 last month, from March’s 49.1.

The 50-point level separates expansion from contraction on a monthly basis.

The reading for April was the weakest since March 2017.

Panelists said they scaled back production due to weaker sales, particularly for electronics and automobiles.

New domestic and export orders shrank for the second month in a row. Panelists attributed the fall in exports to weaker demand from China and Japan and the stronger Korean won.

Companies trimmed staff in the face of weaker demand.

“Evidence from our survey panel suggests that the recently implemented 16 percent hike in the national minimum wage had underpinned some job cutting,” said Joe Hayes, an economist at IHS Markit.

Business confidence eased for the third straight month but remained largely positive, with respondents expecting sales to improve thanks to new product launches and continued global economic growth.

Wednesday’s survey came before a summit between the leaders of the two Koreas last Friday, which led to discussions among South Korea, North Korea and the United States for total denuclearisation in the Korean peninsula.

Reporting by Dahee Kim; Editing by Kim Coghill

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