South Korean Factory Output Drops as Recession Looms
South Korea’s industrial production fell in February for a fifth month as exporters slashed output amid weaker demand from customers in the U.S., Japan and Europe.
Factory output fell 10.3 percent from a year earlier after dropping a revised 25.5 percent in January, the statistics office said today in Gwacheon. That compares with a median estimate of a 16.6 percent decline in a Bloomberg News survey of 12 economists. From a month earlier, output gained 6.8 percent.
Today’s report adds to signs the economy is on the brink of recession following figures this month that showed overseas shipments extended their longest run of declines since 2002 and consumer confidence fell. South Korea unveiled 17.7 trillion won ($13 billion) of additional stimulus spending last week to revive domestic demand after gross domestic product declined last quarter by the most since 1998.
“The decline was smaller than most of us expected, which is good because production didn’t deteriorate further,” said Kim Jae Eun, an economist at Hana Daetoo Securities Co. in Seoul. “Still, it’s too early to say the economy turned around.”
The Kospi stock index gained 1.6 percent, while the won traded at 1,392.25 versus the dollar at 2 p.m. in Seoul compared with 1,392.80 before the report was published.
The decline in the pace of output cuts also eased as there were more working days in February this year compared with last year when the lunar New Year holiday fell. Taking into account the holiday, factory production would have fallen 15.5 percent in January, the statistics office said.
Global Recession
Asia’s economies will expand at the slowest pace since 1998 as a global recession hurts trade and government stimulus plans take time to revive growth, the Asian Development Bank said today instant cash advance. South Korea’s economy will contract 3 percent this year, the first decline since the region’s financial crisis a decade ago, the ADB forecast.
Hyundai Motor Co., South Korea’s largest automaker, this month said that sales fell for a fourth straight month. Hyundai cut production at home and overseas, trimmed jobs in Turkey and India, and reduced executive wages to cope with waning sales.
South Korea’s latest stimulus package will add 1.5 percentage points to GDP and help create 552,000 jobs, the finance ministry said last week. The extra spending follows 51 trillion won in stimulus pledged in the past year.
Asian governments have allocated fiscal spending worth more than $710 billion as their export-dependent economies plummet.
Overseas shipments, which make up about 60 percent of South Korea’s GDP, fell 17.1 percent in February from a year earlier.
Sales of consumer goods rose 5 percent in February from January and dropped 6.2 percent from a year earlier, today’s report showed. Construction orders slid 20.7 percent from a year earlier and investment in factories fell 21.2 percent.
Inventories fell 4.5 percent from a month ago.
A leading index of economic indicators, which provides a gauge of future business activity, fell 4 percent in February from a year earlier.