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South Korea manufacturing shrinks for third month in August - PMI

SEOUL (Reuters) - South Korea's manufacturing sector activity contracted for the third consecutive month in August albeit at a slower pace than July, a private survey showed on Monday, showing that growth momentum in Asia's fourth-largest economy remains elusive.

The HSBC/Markit purchasing managers' index (PMI) on South Korea's manufacturing sector edged up to a seasonally adjusted 47.5 in August from a 10-month low of 47.2 in July, Markit Economics said in a statement.

The index has remained below the 50-point mark separating expansion from contraction in manufacturing activity since June.

The sub-index on new export orders fell to a seasonally adjusted 45.1, the lowest in four and a half years, from 47.5 in July, suggesting that the sector's activity will remain subdued in September.

"Those panel members reporting a decline reasoned that this was largely due to the global economic slowdown," Markit Economics said in a statement. "A number also mentioned the negative impact of production localisation, particularly in China. In addition, political instability in Egypt was highlighted by some firms as reducing export demand from the Middle East."

The reading came after South Korean government data showed on Friday that the country's industrial output shrank in sequential terms during July. The finance ministry warned that labour strife in the auto industry and power conservation measures will lead to a sharper drop in output over August.

But preliminary data released on Sunday showed that South Korea's overseas shipments last month grew by 7.7 percent from a year earlier, marking the strongest rise in seven months and suggesting that the outlook for local exporters are improving.

(Reporting by Se Young Lee; Editing by Eric Meijer)