Shrinking exports drive down industrial outputKorea’s industrial output shrank on-year in January for the first time in 31 months as its export-driven economy is under growing pressure from persistent global market uncertainties, a government report showed yesterday.
According to the report by Statistics Korea, production in the mining and manufacturing industries contracted 2 percent last month from 2010, compared with a 2.8 percent gain in December. This marked the first contraction since June 2009 when the output inched down 0.6 percent.
Industrial production, however, rose 3.3 percent on-month in January after shrinking 0.7 percent in December, the report said.
The country’s service sector output expanded just 0.9 percent on-year last month, with the average operating rate of manufacturers standing at 80.6 percent, a gain of 3.6 percentage points from the month before.
“The output shrank in part due to the falling production of automobiles and audio-video and communications equipment, which dropped 6.9 percent and 11.2 percent, respectively, over the cited period,” the agency said.
The shrinkage came as cloudy external trade conditions and prolonged euro zone debt problems are taking a toll on Korea’s exports.
These declined 7 percent on-year to $41.4 billion in January, with shipments to the euro zone dropping 37.9 percent over the same period.
The country posted a current account deficit for the first time in two years in January. This reached $770 million last month, shifting from a surplus of $2.81 billion the previous month, according to the central bank.
Domestic demand was not helping boost output either as rising oil prices seem to be putting a damper on consumption, analysts said.
Retail sales inched up 0.8 percent on-year in January, but monthly growth slowed to 0.8 percent from December’s 2 percent gain, the report showed.
Dubai crude oil closed at $121.81 per barrel on Tuesday. High oil prices are weighing heavily on Korea, which depends on imports for most of its energy needs.
The central bank kept its key interest rate unchanged for the eighth straight month in February as increased uncertainty regarding the country’s inflation outlook and an economic slowdown continue to challenge the domestic economy.
Analysts said the industrial output figure last month indicated that the economy is losing its momentum in the face of toughening market conditions at home and abroad.
“Korea’s economy seems to be losing its momentum both on export and domestic demand fronts,” said Suh Dae-il, an analyst at Daewoo Securities.
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