Growth of manufacturing inventories hits 26-year high in Q2

Hyundai Motor's Casper is seen at its factory in Gwangju, South Jeolla. [JOONGANG ILBO]

Korea's manufacturing inventories grew at the fastest pace in 26 years in the second quarter of the year, pointing to a full-fledged economic slump, a report said Friday.

The country's manufacturing inventories index expanded 18 percent in the April-June period from a year earlier, according to the report by the Korean Chamber of Commerce and Industry (KCCI).

It marks the highest quarterly increase rate since the 22 percent surge recorded in the second quarter of 1996, shortly before the start of the country's foreign exchange crisis.

Manufacturing inventories also rose for the fourth straight quarter after bottoming out in the second quarter of last year.

"Depending on business fluctuations, inventories naturally rise and fall, but it is the first time in four years for manufacturing inventory levels to go up for a long period," said the KCCI, Korea's largest business organization.

The index for large manufacturers spiked 22 percent on-year in the second quarter, a sharp turnaround from a 6.4 percent decline a year earlier.

The figure for small- and medium-sized enterprises increased 7 percent, compared with a 1.2 percent gain a year earlier.

Indeed, Korea's manufacturing inventories shot up nearly 40 percent in the second quarter from a year earlier.

The KCCI attributed rising manufacturing inventories mainly to corporate efforts to increase supply in response to special demand stemming from eased coronavirus restrictions.

Also responsible were a delay in product shipments due to global supply chain disruptions and a sharp drop in the global supply base resulting from the war in Ukraine, worldwide inflation and America's continued monetary tightening, it added.

Mirroring weakening consumer demand, the production and shipment indexes of Korea's manufacturing industry shrank for four quarters running in the April-June period.

The jump in manufacturing inventory levels comes as Asia's fourth-largest economy struggles to cope with such negatives as slowing exports due to worsening external conditions, runaway inflation and high interest rates.

Korea's exports rose 6.6 percent on year in August, slowing from a 9.4 percent expansion a month earlier. Consumer prices jumped 5.7 percent on year last month, with the central bank hiking its policy rate by a quarter percentage point to 2.5 percent in late August to rein in inflation.

Yonhap