Korea’s industrial output shrank at the sharpest pace in nearly six years in August, raising worries that the economic recovery might be losing its momentum, a government report showed Tuesday.
According to the report by Statistics Korea, production in the mining, manufacturing, gas and electricity industries fell 3.8 percent last month compared to July. This marked the largest on-month drop since December 2008 when it contracted 10.5 percent.
Production in the service sector inched up 0.3 percent in August from a month earlier, the report showed.
“Workers in the automobile sector had their summer vacation mostly in August, which resulted in fewer working days and weak production. This also seemed to have a knock-on effect on the production of other related areas,” Jeon Baek-geun, head of the agency’s short-term industry statistics division, told Yonhap.
“The facility operating ratio and corporate investment were all affected. Since this is due to a one-off factor, we should wait further to know whether the slump is going to continue,” he added.
“I can say that the output is still in a recovery mode, but the problem is that the recovery pace remains weak.”
The manufacturing sector led the overall decline with its output dropping 3.8 percent. The production in automobile and other transportation equipment fell 16.2 percent and 12.7 percent, respectively.
The report showed that the average facility operating ratio in the manufacturing sector declined to 74 percent in August, the lowest ratio since May 2009 when it fell to 73.4 percent.
Facility investment also dropped 10.6 percent in August from a month earlier, which marked the sharpest drop since January 2003, when it fell 16.1 percent, the data showed.
Consumption seems to be improving from the almost frozen market sentiment following April‘s deadly ferry accident.
The report showed that the retail sales index rose 2.7 percent on-month in August, following a 0.3 percent gain tallied in July.
“Consumption seems to pick up in August as people spent more during their summer vacation and demand also rose in the run up to the Chuseok holiday in early September,” Jeon said.
The output data comes as the government is worried that its economy might fall into a long phase of low growth in the face of slumping domestic demand and tough external market conditions.
In July, the government revised down its growth outlook for this year to 3.7 percent from 4.1 percent, citing anemic consumption and slowing exports growth that could hurt its overall economic recovery. (Yonhap)