(Updated with Finance Minister comment)

South Korea’s factory output extended the losing streak for the second month in a row in September because of prolonged chip shortages that continued disrupting auto production, but consumption revived on easing in social restriction rules, helping the overall industrial output gain.

According to data released by Statistics Korea on Friday, the seasonally adjusted mining and manufacturing output in September fell 0.8 percent from the previous month, extending the decline of 0.7 percent in August due to setbacks in production of automobiles and electric equipment. Against a year ago, factory output shrank 1.8 percent.

Factory operation averaged 73.5 percent, down 0.6 percentage points on month. Inventory levels climbed 1.2 percent on month.

Manufacturing output was off 0.9 percent on month. Especially, vehicle output sank 9.8 percent on month amid the protracted shortage of auto chips. Electric equipment production retreated 5.2 percent and semiconductor output also declined 1.6 percent.

Overall industrial output including services activity in September, however, gained 1.3 percent on month, returning to the positive territory in three months thanks to revived spending.

Service output rose 1.3 percent from the previous month.

The accommodation and restaurant sector jumped 10.9 percent on the back of the eased social distancing restrictions amid accelerating vaccination rollouts and coronavirus stimulus checks, rebounding in three months and marking the biggest expansion in seven months.

Finance and insurance fell 0.6 percent while logistics and storage added 4.5 percent on robust export.

Retail sales, a gauge of private consumption, rebounded in September, gaining 2.5 percent from a month-ago period, a turnaround from a 0.8 percent loss in August, as the eased social distancing rules spurred spending. Sales of semi-durable goods like clothing and non-durable goods like cosmetics climbed 5.1 percent and 3.8 percent on month, respectively, but those of durable items like automobiles fell 1.7 percent.

Large discount store sales and supermarket sales decreased 10.6 percent and 4 percent, respectively, but department stores, duty free stores and convenience stores all gained.

Statistics Korea said that an increase in service output and robust retail sales helped boost both production and spending compared to a month ago, signaling that the South Korean economy is back on a recovery track.

Finance Minister Hong Nam-ki also expressed optimism in domestic services and retail sales on his Facebook page on Friday.

“The overall industrial output rebounded by more than 1 percent in September amidst worst flare-up of Covid-19, which will help prop up consumption in the coming quarter,” Hong wrote. However, uncertainties still remain in place due to fears over economic slowdowns in major economies and sustained global supply chain bottlenecks, he added.

Facility investment slowed in September, falling 1 percent from a month ago. Spending in transportation equipment was off 2.7 percent due to disruptions of the global supply of auto chips and that in electric machinery and devices 0.5 percent. Investment in construction sector jumped 3.5 percent on month.

The cyclical component of composite coincident index, which measures present economic activities, remained unchanged at 101.2. The cyclical component of composite leading indicator, which predicts the turning point in business cycle, fell 0.3 point to 102.1.

On Friday morning, the benchmark Kospi fell 0.5 percent to 2,994.60. The Korean won traded at 1,170.20 against the U.S. dollar, up 0.50 won from the previous session.

By Lee Soo-min

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]