Korea’s factory output picks up on capex gain, consumption sluggish longest in 24 yrs

2022.07.29 10:07:22 | 2022.07.29 10:24:09

[Photo by MK DB]이미지 확대

[Photo by MK DB]

South Korea’s factory output strengthened from the previous month in June, backed by increased corporate investment, while consumption contracted for four straight months, the longest period in 24 years amid rapid rises in inflation and interest rates.

According to data released by Statistics Korea on Friday, the seasonally adjusted mining and manufacturing output in June gained 1.9 percent from the previous month, picking up from 0.2 percent gain in May. The growth came on increased production of semiconductors (4.2 percent) and automobiles (7.4 percent). Electronics components output fell 14.4 percent, and chemical products 5.2 percent.

Against a year-ago period, output was 1.4 percent higher.

Manufacturing output was up 1.8 percent from the previous month, the biggest gain after 3.5 percent in December last year, on increased production of chips and vehicles, and also 1.4 percent higher from the previous year. Factory operation averaged 76.5 percent, up 0.9 percentage point from the previous month. Inventory levels were up 5.6 percent on month and 17.5 percent on year.

Capital investment increased 4.1 percent on month in June, staying positive for the second month in a row, on chip facility expansion.

Financial markets were relieved at the output data that eased economic slowdown concerns.

The benchmark Kospi was up 0.71 percent to 2,452.66 on Friday morning. The U.S. dollar fell 0.41 percent to 1,296.6 won.

Overall industrial output that includes services activity in June gained 0.6 percent on month.

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Domestic demand however weakened from the spike in inflation and responsive faster rate increases.

Service output fell 0.3 percent on month after three straight months of gain, as wholesale and retail sank 1.6 percent on a decline in vehicle sales amid cargo truckers’ strike. Arts, sports, and leisure were also down 4.9 percent due to the heat wave.

Retail sales, a gauge of private consumption, fell 0.9 percent in June, extending losing streak for four straight months, or the longest period in more than 24 years.

Sales of durable goods like automobiles were down 2.3 percent in June, semi-durable goods 0.9 percent, and non-durable goods 0.3 percent.

“There were issues with vehicle delivery due to cargo transportation setback in June,” said Eo Woon-seon, a senior official at Statistics Korea. “Sales of semi-durable goods also fell on less outdoor activity due to the heat while private consumption contracted on high prices and interest rates.”

The cyclical component of composite coincident index, which measures present economic activities, was up 0.2 points to 102.4, gaining for two months in a row. The cyclical component of composite leading indicator, which predicts the turning point in business cycle, remained unchanged at 99.4.

Domestic demand, particularly consumption, is expected to stay weighed by inflationary scare.

Consumer prices are expected to rise above 6 percent in July for the second month due to a surge in the prices of agricultural products on top of strong commodity import prices,” said first vice finance minister Bang Ki-sun, Friday.

Consumer prices in June rose 6.0 percent from a year ago, the fastest pace in nearly 24 years.

By Lee Eun-joo

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