Korea’s key industrial output slips 0.7% in May

Despite a 2.7 percent growth forecast announced Thursday by the government, the country’s industrial output, one of the most crucial components of gross domestic product, fell in May, raising doubts about the government’s upbeat forecast.

According to Statistics Korea yesterday, the country’s overall industrial output dropped 0.7 percent last month from a month earlier, led by a 0.4 percent fall in the mining and manufacturing sector.

The construction sector also saw a 4.3 percent decline in production. From a year earlier, the construction business shrunk 19.1 percent due to a slump in housing and office construction.

The falls put a damper on the market’s hope for economic recovery only a day after the government raised its growth estimate by 0.4 percentage point to 2.7 percent this year.?

The mining and manufacturing sector, which used to be the country’s mainstay, shrunk in the first three months of the year. It managed to rebound 0.6 percent in April.

It turns out that a 9.6 percent plunge in production of transportation equipment had a big impact on the sector last month. Chip-making and metal processing also fell 2.5 percent, contributing to the overall decrease, according to the agency.

The output of service industries rose 0.2 percent in May, but couldn’t offset the major fall in mining and manufacturing. The retail sales index, which measures private consumption sentiment, dropped 0.2 percent from a month earlier due to decreased sales of durable goods like IT devices and computers.? Facility investment inched up 1.2 percent on-month, but compared to a year earlier, it remained 11.6 percent lower.

Despite the falling numbers, the Ministry of Strategy and Finance said the second quarter fared better than the first quarter.

“Except for the unusual retreats in some industrial sectors, the economy has taken off pretty well in the second quarter, allowing for some expectations about eventual recovery in the second half of the year,” said the ministry in a report.

BY SONG su-hyun [ssh@joongang.co.kr]