Korean Economy News
Korea's factory output turns negative in Aug despite rebound in domestic demand
2019-09-30


Kim Tae-joon and Kim Hyo-jin



South Korea's factory output turned negative in August after a short-lived rebound while consumption picked up at the fastest pace in more than eight years, sending mixed signs about the economy that has been performing at its worst in a decade.

The seasonally adjusted mining and manufacturing output in August slid 1.4 percent from the previous month, reversing from a 2.8 percent gain in July, according to Statistics Korea on Monday. Against a year-ago period, production was down 2.9 percent.

The main Kospi was trading 0.28 percent lower at 2,044.26 as of 9:46 a.m. Monday. The Korean won fell 0.14 percent, or 1.70, to 1,201.60 against the U.S. dollar.

Output of telecommunications and broadcasting equipment jumped 53.2 percent on strong demand for Korean 5G and latest innovative phone releases. But the gains were offset by a 4.6 percent cut in car production due to discontinuation of several models and troubles of carmakers under foreign ownership. Rubber and plastic output dropped 5.9 percent from reduced production of car tires and transportation equipment.

Factory operation averaged 73.8 percent, down 1.0 percentage points from a month ago. Inventory level fell 1.7 percent on month but rose 5.6 percent on year.

Service sector output expanded for the second straight month to add 1.2 percent in August against the previous month. Education fell 1.6 percent while wholesale and retail sectors were up 2.4 percent and finance and insurance 1.5 percent.

Retail sales - a barometer for private consumption - increased 3.9 percent in August, rebounding after a two-month losing streak and growing at the fastest pace since January 2011. Sales of durable goods like cars jumped 8.3 percent thanks to a rush of new models. Sales of non-durable goods like food and semi-durable goods like clothes also climbed 3.0 percent and 1.0 percent, respectively.

Capital investment rose 1.9 percent, extending the 2.1 percent gain in July. Investment in industrial machinery, including chipmaking equipment, was up 1.7 percent and aircraft and other transport equipment 2.1 percent.

The coincident index, which measures the current state of economic activity, gained 0.2 points to 99.5. The leading indicator, which forecasts future economic activities to suggest where the business cycle is heading, slipped further, down 0.1 points at 98.3.



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