S.Korea factory activity accelerates in April, cost pressures continue

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© Reuters. FILE PHOTO: People pose for photographs on a sunny spring day amid the coronavirus disease (COVID-19) pandemic at a Han river park in Seoul, South Korea, April 19, 2022. REUTERS/Kim Hong-Ji

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SEOUL (Reuters) – South Korea’s factory activity accelerated in April, but cost pressures due to the Ukraine crisis and China’s strict lockdown measures continued to weigh heavily on manufacturers, a private-sector survey showed on Monday.

The S&P Global (NYSE:) purchasing managers’ index (PMI) rose to 52.1 in April from 51.2 in March, standing above the 50-mark threshold for the 19th straight month that indicates expansion in activity.

Output returned to expansion after shrinking in March, with new orders increasing at a faster pace, though those for exports continued to decrease.

Manufacturers were seen building input stocks amid ongoing supply chain disruptions and high inflationary pressures, while passing higher costs onto customers.

Output prices rose at a record pace in the survey’s 18-year history, while input prices rose at the fastest pace in five months. Stocks of purchases also increased by the most in a year.

“Price and supply pressures were exacerbated by the ongoing war in Ukraine and the re-imposition of strict COVID-19 restrictions across China, both of which stifled export orders partly due to port congestion and a lack of available containers,” said Usamah Bhatti, economist at S&P Global.

“As part of efforts to protect themselves from future disruption and higher cost burdens, manufacturers looked to increase and store additional stocks of raw materials and semi-finished goods.”

Manufacturing firms remained optimistic over the coming year for output, but the level of positive sentiment fell to the lowest since December 2021.

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