[Graphics by Song Ji-yoon]
South Korea’s factory and service activity gained steam led by strong exports and eased mitigation measures against virus spread, feeding 10-year high business sentiment.
According to the Statistics Korea on Wednesday, the seasonally adjusted mining and manufacturing output in February grew 4.3 percent from a month earlier, the biggest monthly gain since June 2020. Against a year earlier, it was up 0.9 percent.
Factory output expanded 4.9 percent, reversing from 1.5 percent contraction in January. Operation averaged 77.4 percent, up 4.2 percentage points on month. Inventory level gained 0.4 percent on month but fell 2.6 percent on year.
Semiconductor output surged 7.2 percent on month and chemical products 7.9 percent, while communication devices output plunged 10.5 percent.
The data had mild impact on the markets.
The benchmark Kospi closed Wednesday down 0.28 percent at 3,061.42. The Korean won finished up 0.15 percent at 1,131.8 against the U.S dollar.
Overall industrial output including service sector but excluding agriculture, fishery and forestry rose 2.1 percent on month, the fastest addition since June 2020. The index reached 111.6, the highest since data tracking began in January 2000 and coming above 111.5 recorded in December 2019 or before the Covid-19 crisis.
Service sector output added 1.1 percent on month, turning positive for the first time in two months. Restaurant and accommodation service surged 20.4 percent on easing in social restriction rules. Transportation and storage service output increased 4.9 percent on the back of strong trade activity.
Retail sales, a barometer for private consumption, however, retreated 0.8 percent. It is the first monthly decline since November last year and the biggest loss in seven months.
The loss was mainly due to non-durable goods sales that tumbled 3.7 percent on month as people spent less on food for home-cooked meals to dine out more. Durable goods like computer sales declined 1.7 percent against strong January. Sales of semi-durable goods like clothes gained 9.7 percent.
Spending at department stores shot up 12.1 percent and at specialty retailers 7.4 percent, benefiting from pent-up consumer demand for luxury goods. Sales at hypermarkets plummeted 10.1 percent and at grocery stores 6.8 percent on weakened spending for food and other household items.
Capital investment shrank 2.5 percent on month, the first decline since October last year. Investment in transportation equipment like vessels expanded 10.4 percent but it was offset by 6.2 percent decline in machinery investment like chip-making equipment import.
The coincident index, reflecting current economic activities, gained 0.3 point compared to January. The leading indicator, showing where the economy is headed, rose 0.2 point and extended the gaining streak to the ninth month. It is the longest run of gains since February 2009-January 2010.
According to a separate data from the Bank of Korea, the business sentiment index (BSI) for March added 7 points on month to 83, the highest since July 2011.
The BSI outlook for April came at 84, up 6 points and the highest since May 2012.
The index for manufacturers gained 6 points to 91, the highest since August 2011. That of non-manufactures was 78, up 5 points and the best since July 2018.
Exporters’ BSI outlook rose 7 points to 101, returning above the 100-mark for the first time since June 2011.
The economic sentiment index (ESI), which combines business confidence level and consumer sentiment index, reached 101.3, up 4.7 points on month. The last time the ESI broke above 100 was June 2018.
A reading above 100 means more business and consumer are optimistic than pessimistic, whereas a figure below 100 means the opposite.
By Cho Jeehyun
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