South Korea's industrial output shrank slightly on-month in July amid tough economic conditions at home and abroad, a government report showed Friday.

According to the report by Statistics Korea, production in the mining, manufacturing, gas and electricity industries dropped 0.1 percent last month from a month earlier. This marked a turnaround from a revised 0.6 percent gain in June.

Service sector production also contracted 0.2 percent on-month in July, but it expanded 0.8 percent compared with a year earlier.

The report attributed the anemic July output figures to weak performance in the manufacturing industry.

"Despite increases in semiconductors, parts and foodstuff, automobiles and machinery equipment saw their production decline, leading to a 0.2 percent output contraction in the overall manufacturing industry," the report said.

The average facility operating ratio in the manufacturing industry also fell to 74.2 percent in July, the lowest level in a year. The drop was due in part to prolonged labor strikes underway at carmakers including Hyundai Motor Co., a statistics agency official said.

Consumption and business spending also remained weak.

Retail sales inched up 1.1 percent on-month in July, which was a slight improvement from June's revised 0.9 percent gain. They also increased 1.1 percent compared with a year earlier.

Sales at department stores and large-size marts, however, dropped 3.1 percent and 0.1 percent on-year, the report showed, indicating that consumer sentiment is not strong enough to bolster private-sector spending.

Business spending turned south. Facility investment, in particular, fell 2.5 percent on-month in July, affected by less investment in machinery and transportation equipment, the report said.

This marked a turnaround from a 6.7 percent gain in June. From a year earlier, investment on facilities also shrank 8.3 percent, the report showed.

The latest data comes amid concerns that the country's economy is facing tough market conditions at home and abroad, which appears to be dimming the prospects for its fast recovery.

The bleak outlooks promoted the government to engage in various stimulus efforts over the past months including a 17.3 trillion won

(US$15.5 billion) supplementary budget which is aimed mostly at boosting consumption and corporate investment.

The country's central bank also slashed its benchmark interest rate by 0.25 percentage point in May in an apparent bid to help the government effort to keep the economy going.

In recent months, South Korea's economy shows some signs of picking up, though its pace still remains slow.

The country's gross domestic product grew 1.1 percent in the second quarter from three months earlier, quickening from a 0.8 percent on-quarter advance in the first quarter. This is the first time that the growth rate surpassed 1 percent in nine quarters. (Yonhap News)