Korea’s factory inventories in Dec at their highest since ’98 financial crisis

2019.02.11 13:12:40 | 2019.02.11 14:56:23

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South Korea’s manufacturing inventory levels last December have piled up to their highest since the 1998 Asian financial crisis due to slow sales, in an another alarming sign of a lengthy slump in the economy.

The inventory of Korean manufacturers was 116.0 percent in December, the highest since September 1998 when it reached 122.9 percent at the height of the Asian financial crisis, according to Statistics Korea and Korea Center for International Finance on Monday.

The inventory ratio is calculated by dividing the amount of unsold goods at the month-end by its monthly shipments. It has been on an upward curve since late last year, rising from 106.9 percent in October to 111.7 percent in November.

Inventories can be kept intentionally high during times of strong economic growth as companies stock up in anticipation of growing demand. But rising inventory is often a sign of slowing growth since a slump in consumer spending leads to an excess stock of unsold goods. This prompts companies to scale back their production, which further accelerates the economic downturn.

The country’s average factory output in December was 72.7 percent, sliding for the second straight month to the lowest in eight months.

High inventory levels were seen in most of the country’s mainstay industries. The auto sector reported a 7.1 percent month-on-month decline in shipments in December and 6.5 percent increase in inventory. Semiconductor shipments also fell 5.1 percent over the same period while inventory climbed 3.8 percent. Shipments of steel and other primary metals slid 2.5 percent while inventory gained 3.2 percent.

A government official attributed the country’s rising inventory to not only poor domestic demand but also the ongoing trade frictions between China and the United States, which have dealt a heavy blow to the export-reliant economy.

By Kim Tae-joon and Kim Hyo-jin

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