South Korea manufacturing sector deteriorates amid tariff concerns

Investing.com -- South Korea’s manufacturing sector showed renewed deterioration at the start of the fourth quarter of 2025, with the S&P Global South Korea Manufacturing PMI falling to 49.4 in October from 50.7 in September.

The latest PMI data revealed contractions in both output and new orders, reversing the modest improvements seen in September. Manufacturing production volumes declined marginally, marking the seventh decrease in the past eight months, while new order intakes fell at a moderate pace.

Manufacturers cited domestic economic weakness and the impact of US tariffs as key factors weighing on production and demand. New export sales decreased only fractionally, though at a softer rate than total new orders.

Employment levels fell for the first time in three months, albeit marginally, as companies often opted not to replace voluntary leavers. Backlogs of work decreased to the largest degree since June, indicating persistent spare capacity as firms redirected resources to complete existing work amid subdued demand.

Price pressures remained historically elevated in October. Input costs rose sharply, driven by higher raw material prices from abroad due to unfavorable exchange rate fluctuations and, in some cases, tariffs. As a result, factory gate charges increased for the eleventh consecutive month, though at the softest rate in three months.

Purchasing activity declined as production requirements weakened and higher prices affected input buying decisions. However, some manufacturers sought to purchase and store materials in advance to guard against further price increases and potential supply disruptions. Supplier performance deteriorated, with the most pronounced lengthening of average lead times since July.

Looking ahead, business confidence remained positive but modest. The degree of optimism improved slightly from September but stayed below the series average. Manufacturers expressed hopes for a boost from the mass production of newly launched products, though concerns persisted about domestic economic weakness and the long-term impacts of tariffs.

"The positive signals for the South Korean manufacturing economy observed at the end of the third quarter largely evaporated in October," said Usamah Bhatti, Economist at S&P Global Market Intelligence. "Output, new orders, and employment all returned to contraction territory, with firms highlighting weakness in the domestic economy."

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