July industrial output shows an anemic recovery

The Korean economy is recovering, but the pace is dismal, the Ministry of Strategy and Finance said yesterday in a report on industrial output in July.

According to data provided by Statistics Korea, overall industrial production grew 0.2 percent last month compared to June, expanding for the second consecutive month.

The total growth of industrial output fell in April and May in the wake of the Sewol ferry tragedy.

In July, growth was led by a 1.1 percent production increase in the mining and manufacturing sector. The manufacturing sector grew 1.2 percent, because there were more operating days than in June.

Automobile production surged 10.7 percent, and the petrochemical industry grew 7.5 percent.

Facility investment expanded 3.5 percent last month, largely thanks to the industrial equipment, metals and automobile industries.

However, the construction industry dropped 1.4 percent, and the service sector decreased 0.4 percent.

Output in the lodging, restaurant, arts, and sports and leisure industries grew, but wholesale, retail, publications, broadcasting communications and finance retreated.

Private consumption showed little sign of recovery. Sales of nondurable goods like cosmetics rose 0.7 percent, while those of durable goods such as home appliances fell 2.1 percent.

Retail sales inched up 0.3 percent, increasing for the third consecutive month.

“Sluggish industrial activities started to recover from June, but the pace is slow,” said Kim Byung-hwan, a director at the Finance Ministry. “There are many uncertainties in the near future, because even though consumer confidence is slowly recovering, companies’ business sentiment is still dire.”

At a cabinet meeting yesterday, Choi Kyung-hwan, deputy prime minister for the economy, said he feels “desperate” about reviving the economy.

“Considering the current conditions of the economy, it may fall into a long-term recession,” he said. “Because of tight government coffers due to falling tax revenue, it was not easy to decide to use an expansionary fiscal plan. But in the short term, the fiscal policy will play an active role.”

He added the government will monitor fiscal soundness over the long run.

“There are many warnings about deflation when low growth continues for an extended period of time,” said Choi. “We should be alarmed and try not to lead the economy in that direction.”

Meanwhile, to prevent another tragedy like the Sewol ferry sinking, the ministry said it has decided to increase the budget for safety from 12.4 trillion won ($12.2 million) this year to 14 trillion won in 2015.

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