S.Korea factory activity shrinks again in Oct as output drops, PMI shows

By Jihoon Lee

SEOUL (Reuters) - South Korea's factory activity shrank for a second straight month in October, with output falling by the most in 16 months, a private survey showed on Friday, adding to recent signs of a slowdown in global demand.

The purchasing managers index (PMI) for manufacturers in Asia's fourth-largest economy, compiled by S&P Global, stood at 48.3 in October on a seasonally adjusted basis, unchanged from September.

In September, the index fell below the 50-mark, which separates expansion from contraction, for the first time in five months and registered the lowest reading since June 2023.

The latest survey showed output declined at the fastest rate since June, 2023, with firms noting lower order volumes due to muted economic conditions. The slump in new orders, however, was marginally softer than in the previous month.

The fall in new export orders also narrowed slightly, with firms saying demand was weak in the United States, Europe and China.

"With the sector often viewed as a bellwether for global exports, October data provides likely indications of a gradual slowdown in global trade and industrial activity," said Usamah Bhatti, economist at S&P Global Market Intelligence.

South Korea's economy barely grew in the third quarter due to weakness in exports, after an unexpected contraction in the second quarter, raising the chance for more stimulus to support growth.

The survey also showed purchasing activity shrank for the first time since August 2023 and backlogs of work declined by the most since June 2023, which often indicate near-term activity.

But manufacturers' optimism for the year ahead improved in October, after hitting a 21-month low in September, as firms hoped for demand recovery in auto and semiconductor sectors even though concerns about the economy persisted.

(Reporting by Jihoon Lee; Editing by Shri Navaratnam)