Manufacturing picked up in December index

Korea’s manufacturing activity picked up in December to its strongest level in seven months, a private-sector survey showed on Thursday, although new export orders dipped in a sign that it may be hard to gain further momentum in early 2014.

The HSBC/Markit purchasing managers’ index of Korea’s manufacturing sector rose to a seasonally adjusted 50.8 in December from 50.4 in November, Markit Economics said, the highest reading since May.

The index stood above 50, which separates growth from contraction in manufacturing activity, for the third consecutive month, suggesting that Asia’s fourth-largest economy has picked up strength despite data showing output was flat in November.

The sub-index for new export orders fell to a seasonally adjusted 50.7 from 51.9 in November, however, a sign that manufacturers could hit a soft patch in early 2014.

“Korea’s economic prospects are slowly brightening,” said HSBC economist Ronald Man. “The stronger increase in manufacturing output suggests that growth will be sustained over the final quarter of the year, keeping the economy on track for a gradual recovery.

“But given demand from China has still not shown signs of picking up meaningfully, we believe the overall upswing in economic activity will be limited.”

The economist said HSBC expects the Bank of Korea to keep rates low at 2.5 percent in the first quarter of this year “to support growth.”

Government data showed on Wednesday that Korea’s exports rose by an annual 7.1 percent in December, better than a 6.4 percent rise tipped by a Reuters survey. Reuters