South Korea‘s factories were ravaged by the coronavirus outbreak in April, as worldwide lockdowns sent activity tumbling at its sharpest pace since the global financial crisis with exporters battered by the worst slump in orders in 16 years.
The IHS Markit purchasing managers‘ index (PMI) skidded to 41.6 in April, the lowest reading since January 2009 and below the 50-mark that separates contraction from expansion, as the pandemic brought the global economy to a standstill.
The private survey, released on Monday, had a headline reading of 44.2 in the previous month.
“Panel member reports suggest that automobile-related industries are being hit particularly hard by shutdowns overseas such as in North America and Europe, while severe supply chain dislocations mean that factories that do stay open are operating below capacity,” IHS Markit economist Joe Hayes said in a statement.
The pandemic‘s impact on global demand was telling.
Total new orders dived the most in 11 years, while export orders suffered the worst contraction on record since the survey series began in April 2004 due to factory closures both at home and from abroad.
The survey results back last week‘s data showing equally grim export trade numbers for April, which also showed shipments shrinking at the fastest pace since the height of the financial crisis over a decade ago.
Factory shutdowns due to reduced global demand led to a plunge in production, with the index tumbling to 34.0 from 38.5 a month earlier.
“Although China, South Korea‘s biggest export market, appears to be slowly re-opening for business, it‘s clear this will be far from sufficient to offset the severe weakness elsewhere,” Hayes said.
“It‘s certainly going to be a challenge for South Korean policymakers to prop up an economy that‘s so reliant on global trade.”
South Korea‘s economy, Asia‘s fourth largest, suffered its biggest contraction since 2008 in the first quarter as the pandemic took a heavy toll on businesses and consumers.
The government has pledged stimulus packages totalling about 240 trillion won ($196.82 billion) to tackle the economic impact from the virus outbreak.
Monday‘s survey also showed firms froze hiring and sacked employees to cope with the sharp downturn in production and sales. The rate of job shedding was the joint-strongest on record.
Businesses were seen taking an even pessimistic view than in March, bringing the future output index to a new record low since the data was first recorded in April 2012.
More than 3.45 million people have been infected with coronavirus across the world, according to a Reuters tally, with nationwide infections in South Korea surpassing 10,750.
(Reporting by Joori Roh; Editing by Shri Navaratnam)