South Korea's factory activity contracts for fifth month, new orders shrink - PMI

SEOUL(Reuters) - South Korea's factory activity contracted for a fifth consecutive month in July and marked the worst slump since November 2016, as both new orders and output shrank, a private manufacturing survey showed on Wednesday.

The Nikkei/Markit purchasing managers' index (PMI) fell to a 20-month low at 48.3 in July, from June's 49.8, remaining below the 50-point mark that separates growth from contraction since March this year.

Manufacturing activity was hit by output and new orders shrinking to 3-month lows, at 47.8 and 47.3, respectively. Reflecting the grim conditions, business confidence also plunged to ten-month low, the survey showed. The output reading reflects significant weakness seen in the June production data.

"Firms have not signalled higher output since February, while anecdotal evidence continues to point to weak demand pressures originating specifically from the domestic economy," said Joe Hayes, an economist at HIS Markit.

The weakness in domestic demand comes at a time of heightened global growth worries as a U.S.-driven international trade war threatens to hurt major export-reliant economies.

A sub-index for new export orders fell 50.1 last month from 52.9 in June, signalling only a marginal rise in new business from abroad - a trend if continued could significantly hurt economic growth.

Like some other major economies, South Korea risks getting caught in the crossfire of a heated trade row between the United States and China - its biggest export market. That has added to the uncertainty for its globe-trotting manufacturers.

Panelists said they reduced output due to fewer incoming new workloads, undermined by stiff competition. Higher oil price, and a stronger U.S. dollar also raised their input costs, the survey showed.

(Reporting by Hayoung Choi, Cynthia Kim;Editing by Shri Navaratnam)