Manufacturing leads as output up for another month
Industrial output in February was up 0.4 percent year-on-year, a slowdown from the 1.5 percent increase in January, according to Statistics Korea.
On month, the increase was 2.1 percent, the best showing since June last year, when month-on-month output grew 3.9 percent.
The mixed message was interpreted as overall positive by the government.
The month-on-month increase was largely driven by the increase in manufacturing fueled by strong exports. Manufacturing production in February when compared to the previous year grew 1 percent, which is slower than the 7.7 percent in January.
When compared to the previous month, it grew 4.9 percent. This is the strongest growth since the 8.4 percent month-on-month growth in June 2020.
Services grew year-on-year and month-on-month.
Restaurant and accommodation output fell on year but was up on month as social distancing rules started to ease.
Service output overall grew 0.7 percent year-on-year, which is a turnaround from a 1.8 percent decline in January. On month, services grew 1.1 percent, a turnaround from the negative 0.1 percent growth in January.
Year-on-year restaurant and lodging output declined 11.4 percent. But when compared to the previous month, it surged 20.4 percent.
The increase of people going out to eat was evident in spending as well.
In February, consumer spending surged 8.4 percent year-on-year. Spending compared to the previous month declined 0.8 percent, a turnaround from 1.6 percent increase in January.
The statistics agency cited a decline in spending on food and beverages as more people were shopping less for groceries as they started to eat out due to eased social distancing.
“The overall industrial output thanks to the improvement in manufacturing and mining and in investment grew 2.1 percent [month-on-month], recovering to the level before the crisis a year ago,” Finance Minister Hong Nam-ki said on Wednesday during a government emergency economic meeting.
He stressed that strong export growth and recent reports on increased card spending show that the economy is recovering and sentiment is improving as well.
“The second quarter is a ‘tipping point’,” Hong said. “And as such, we will focus on consolidating the improving economic trend while solving the difficulties that self-employed business owners and vulnerable people in regards to employment face.”
The finance minister said in order to boost the domestic economy a large-scale discount event will be considered. An event of this kind was held for the first time in June last year.
The latest output report came on the heels of the International Monetary Fund (IMF) raising Korea’s economic outlook from its previous projection in January, citing the recently passed 15-trillion-won ($13 billion) supplementary budget.
The expansionary fiscal spending raised the IMF’s outlook for Korea from 3.1 percent to 3.6 percent for this year.
The IMF forecast is the most positive. The Organization for Economic Cooperation and Development (OECD) predicts growth of 3.3 percent this year. The Bank of Korea projects 3 percent, while the state-owned Korea Development Institute projects 3.1 percent growth.
The forecasts could be raised as some were made before the supplementary budget was approved.
If Korea’s economy expands as much as projected by IMF, it would be the fastest growth in a decade. The last time the economy grew at such a rate was in 2011, when it expanded 3.7 percent year-on-year.
The Korean economy after recording a 3.2 percent growth in 2017 has fallen below to the 2-percent range since.
Last year the GDP for the first time since 1998 recorded negative growth as it contracted 1 percent.
BY LEE HO-JEONG [firstname.lastname@example.org]