SEOUL, (Reuters) - South Korea’s factory activity contracted for the third month in a row in May as new orders continued to decline, prompting companies to cut staff at the fastest pace in almost a decade, a private manufacturing survey showed on Friday.
The Nikkei/Markit purchasing managers’ index (PMI) on operating conditions for the manufacturing sector edged up to 48.9 last month, from 48.4 in April. But it remained below the 50-point level which separates expansion from contraction on a monthly basis.
Panelists said declining orders from buyers at home and abroad prompted them to reduce output for the third month in a row, though orders and output did not shrink as much as in April.
The downturn prompted companies to cut payrolls at the fastest pace since December 2008, during the global financial crisis. Some panelists also said they were reducing staff levels to cut costs after a recent increase in the minimum wage.
The job trend is “highlighting the downside impact of President Moon’s labour market reforms,” said Joe Hayes, an economist at IHS Markit.
Overall business confidence eased for the fourth straight month to lowest since last October but the respondents still remained positive about South Korea’s business conditions in the coming 12 months due to planned new product launches while stronger demand from clients was expected.
Reporting by Dahee Kim; Editing by Kim Coghill