S Korea June HSBC PMI 49.4 Vs 51.0 in May
07/01/2012| 08:33pm US/Eastern
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By In-Soo Nam
SEOUL--South Korea's manufacturing activity contracted for the first time in five months in June, indicating business conditions worsened amid persistent concerns about the euro-zone debt crisis, according to data released by HSBC Monday.
The HSBC Purchasing Managers' Index was at a seasonally adjusted 49.4 in June, falling below the neutral level of 50. In May the index was at 51.0.
A reading above 50 indicates expansion in manufacturing activity, while a reading below that signals contraction.
"Persistent global uncertainties continue to weigh on Korean manufacturing conditions. Should the slowdown in demand for Korean goods be sustained, manufacturing employment may start to contract," HSBC Economist Ronald Man said in a report on the data.
Mr. Man said policymakers must therefore support domestic activity to keep Korea on track for a gradual recovery this year, especially as external demand remains weak.
"We believe fiscal stimulus will prove more effective than monetary easing, given the Bank of Korea's policy rate is already accommodative," he said.
New export orders decreased in June, the first reduction since January, with "anecdotal evidence" suggesting that instability in the European market affected demand, HSBC in a statement accompanying the data.
The cost of inputs dropped modestly in June, marking the first decline since November 2009.
Write to In-Soo Nam at in-soo.nam@dowjones.com
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