South Korea Manufacturer Confidence Drops to 3-Year Low

South Korean manufacturers’ confidence dropped to the lowest level in more than three years as Europe’s worsening fiscal crisis damped sentiment in a country where exports make up about half the economy.

An index measuring expectations for August was at 70, the lowest level since May 2009, after dropping from a revised 81 in July, the Bank of Korea said in a statement in Seoul today. A measure of expectations at non-manufacturing companies also dropped to 69 from a revised 76.

“The South Korean economy is muddling through uncertainty caused by the European debt crisis,” Oh Suk Tae, an economist at SC First Bank Korea Ltd. in Seoul, said before the release. “The central bank indicated that it’s ready to act, but the market is expecting supplementary fiscal support only if the economy contracts significantly.”

Asia’s fourth-largest economy grew at the slowest pace in almost three years last quarter, with HSBC Holdings Plc and Citigroup Inc. saying the Bank of Korea may cut rates again this year. The BOK lowered its main rate a quarter percentage point to 3 percent on July 12, and Governor Kim Choong Soo warned last week the nation may miss a 3 percent growth estimate for 2012.

Consumer confidence fell to a five-month low in July, the BOK said on July 25. The business survey, conducted from July 16 to July 23, was based on responses from 1,430 manufacturers and 1,016 non-manufacturers.

To contact the reporter on this story: Cynthia Kim in Seoul at ckim170@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net