Manufacturers reel from 3-year low

The manufacturing sector grew at the slowest pace in more than three years in the third quarter as exports and domestic demand remain weak amid the global downturn, data showed yesterday.

Production grew 0.4 percent in the third quarter from a year earlier, down from a 1.5 percent on-year gain in the second quarter, according to data compiled by the state-run statistics agency.

The third-quarter data marked the slowest growth since it fell 5.8 percent on-year in the second quarter of 2009.

The manufacturing sector, the backbone of the domestic economy, has been hit hard by the longstanding global economic slowdown as exports account for about 50 percent of Asia’s fourth-largest economy.

Recent central bank data showed that Korean manufacturers’ business confidence for December declined to a near four-year low as the growth outlook remained bleak.

Local smaller manufacturers face a much tougher business environment, aggravated by sluggish domestic demand and squeezed funding conditions, data showed.

Production by smaller manufacturers fell 1.8 percent on-year in the third quarter after contracting 1.7 percent in the second quarter from a year earlier.

The third-quarter figures marked the worst performance since a 2.1 percent on-year fall in the third quarter of 2009, data showed.

Small businesses are facing difficulties raising capital as local banks are wary of lending to them and the market for bond sales is also frozen, experts say.

Korean banks’ lending to smaller firms grew 41.8 trillion won ($38.6 billion) between January 2009 and October 2012, sharply slowing from some 121 trillion won growth made in the 2006-2008 period, central bank data showed.

“Investors’ appetite for safer assets is heightened in the corporate debt market. Demand for low-rated corporate bonds is shrinking, making such debt sales more difficult,” said Kang Sung-boo, an analyst at Shinhan Investment.

Yonhap