South Korea’s Factory Blues Deepen: New Orders Fall The Most Since COVID Pandemic As US Tariffs Bite

South Korean manufacturing activity contracted again in May, while new orders saw the sharpest decline since June 2020 as U.S. tariffs weighed on demand.

The S&P Global Purchasing Managers Index (PMI) rose slightly to 47.7 in May from 47.5 in April, but remained below the 50 mark, which signifies another month of contraction.

"South Korea's manufacturing sector came into May on unstable footing,” Usamah Bhatti, Economist at S&P Global Market Intelligence, said.

"Firms often mentioned that the contraction was attributed to a continuing stagnation in the domestic economy, as well as the continued impact of higher US tariffs on the home market, as well as on key export markets,” Bhatti added.

President Donald Trump’s tariffs have further pressured Asia’s fourth-largest economy, which was already reeling from political instability and the worst wildfire in its history.

In May, South Korea’s exports also fell for the first time since January, with shipments to the U.S. declining by 8.1% amid tariff fears.

May data also signalled a fall in backlogs of work for the second successive month. The rate of depletion was sharp, and the most pronounced in nearly five years, as firms looked
to complete existing work amid muted new orders, S&P said.

The May data also indicated a second consecutive monthly decline in work backlogs. S&P said that South Korean companies focused on completing current projects due to weak new order inflows, resulting in a sharp rate of backlog depletion, the most significant in almost five years.

However, employment rose for the first time since October last year, and sentiment rose.

The iShares MSCI South Korea ETF (EWY) has gained nearly 18% this year compared to a marginal decline in the SPDR S&P 500 ETF (SPY).

South Koreans would elect a new president on June 3.

Also See: Oil Prices Rise After OPEC+ July Output Boost Viewed As Less Than Feared

For updates and corrections, email newsroom[at]stocktwits[dot]com.