The South Korean government stayed downbeat about the economy for the second straight month as economic conditions and outlook worsen due to escalated trade war between the United States and China.
“Key macroeconomic data – factory output, facility investment, and exports – points to sluggishness due to increased downside risks from faster slowdown in the global economy and chip industry downturn,” the Ministry of Finance and Economy said in its monthly economic review dubbed Green Book for May.
The ministry was more upbeat until March, emphasizing the “positive momentum” from improvements from data. From last month’s review, it mentioned “sluggishness” for the first time since the issue in February 2016.
It admitted that the improvement in March looked better against poor numbers in February.
According to the latest Green Book, the country’s industrial output rose 1.1 percent in March against a month earlier with manufacturing and service outputs growing 1.4 percent and 0.2 percent, respectively. But the gain was possible largely because the industrial output in the previous month had contracted 2.6 percent on month, the worst in two years.
Exports in April sank for the fifth month in a row as softening in global memory chip prices and slowdown in the world’s major economies, especially China, continued to weigh on the country. Outbound shipment in April was down 2 percent to $48.9 billion from the same month a year earlier. Both coincident and leading indicators, which measures present and future economic activities, in April slipped by 0.1 percent on month.
The gross domestic product in the first quarter was the worst in a decade, contracting 0.3 percent from the previous quarter.
The ministry, however, pinned hope on the fragile recovery in sentiment.
The consumer sentiment index in April gained 1.8 percentage points to 101.6, extending the upward move to the fifth straight month. The business sentiment in the manufacturing industry also improved 2 percentage points to 75 and the reading for future outlook grew 1 percentage point to 77.
The economy faces more headwinds from expanded trade conflict between the world’s two largest economies that added volatilities to the financial and commerce market, it said. The government will execute spending timely and remove regulations with “speed” to back exports, it added.
By Sohn Il-seon and Cho Jeehyun
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]