SEOUL, April 1 (Reuters) - South Korea’s factory activity fell at its fastest pace in 11 years in March, a private sector survey showed on Wednesday, as the coronavirus pandemic paralysed global demand and supply chains.
The IHS Markit purchasing managers’ index (PMI) plunged to 44.2 in March, its lowest since January 2009 when the economy was reeling from the global financial crisis. The index was 48.7 in February.
Total new orders suffered the worst contraction since January 2009, as the spike in global infections further weighed on demand. Export sales also shrank at their fastest pace in just over 11 years.
Survey respondents reported some order cancellations led by supply chain disruptions and weaker sales especially in China, Japan and the United States.
Factory production was also struck hard, with the index tumbling to 38.5 from 44.4 a month earlier, the sharpest decline in 11 years.
The sharp contraction in manufacturing production reflects “intensified supply chain disruption and a stronger negative demand shock as aggregate orders fell substantially,” IHS Markit economist Joe Hayes said.
More than 738,500 people have been infected by the virus globally with at least 35,000 casualties, tripling in just a month, according to a Reuters tally.
South Korea reported the largest outbreak in Asia outside China, with just under 10,000 infections although the trend has slowed since the peak in February when it recorded 909 cases on a single day.
“Although South Korea has succeeded in ‘flattening the curve’ ... it has still succumbed to a substantial economic shock,” Hayes said.
On Monday, the finance ministry said it would soon draw up a second supplementary budget worth $5.81 billion. The country has already cut interest rates, rolled out an initial $9.58 billion supplementary budget and a $81.87 billion rescue package for companies.
The survey also showed business sentiment were the most pessimistic since the future output index was first recorded in April 2012.
Still, limited factory shutdowns in South Korea and a gradual resumption of production in China have presented silver linings.
China’s PMI unexpectedly expanded in March from the collapse to a record low in February, the National Bureau of Statistics said on Tuesday.
“South Korea’s success in suppressing the spread of COVID-19 increases the chances of the domestic economy recovering at a quicker rate than otherwise,” Hayes noted. ($1 = 1,221.4500 won) (Reporting by Joori Roh; Editing by Sam Holmes)