S. Korea's factory output fall for 2nd mo in Aug., consumption, capex jump

[Graphics by Song Ji-yoon]

South Korea’s factory output contracted on month for a second month in August due to a fall in production of semiconductors and chemical items, but consumer and corporate spending recovered from the previous month partly thanks to summer vacation retail spending.

According to data released by Statistics Korea on Friday, the seasonally adjusted mining and manufacturing output in August fell 1.8 percent from the previous month on weaker production of chips and chemical items, declining for the second month in a row after a 1.3 percent contraction in July.

Against a year-ago period, it rose 1.0 percent.

Manufacturing output also fell 1.6 percent on month in August and rose 0.8 percent on year. Factory operation averaged 75.2 percent, unchanged from the previous month. Inventory levels were 0.4 percent lower on month and 12.3 percent higher on year.

Auto production rose 8.8 percent in August from a month ago, machinery equipment 6.9 percent, and other transportation equipment 4 percent, while chip production fell 14.2 percent, chemical products 5 percent, and electrical equipment 4.4 percent.

The subdued factory activity led the country’s overall industrial output including services activity in August to dip 0.3 percent on month. It added 0.7 percent in May and 0.8 percent in June but reversed the direction in July, falling 0.3 percent.

Service output added 1.5 percent on month in August as wholesale and retail sector rose 3.7 percent, financial and insurance 3.1 percent, education 2.3 percent, professional, science and technology 0.8 percent, and leisure 2.6 percent. Against a year ago, service output added 7.1 percent on 1 6.2 percent jump in wholesale/retail and a 32.0 percent jump in accommodation/restaurants.

Health and social welfare, on the other hand, fell 1.3 percent, accommodation and restaurants 1 percent, and transportation and warehouse 0.3 percent.

Retail sales, a gauge of private consumption, rose 4.3 percent on month and 2.3 percent on year in August, rebounding for the first time after five straight months of decline from 0.7 percent in March to 0.4 percent in July. The recovery was largely driven by retail spending during the summer holiday.

Sales of non-durable goods such as cosmetics, food items, and stationery rose 5.2 percent on month and durable goods such as automobiles and home appliances 4.2 percent. Sales of semi-durable goods such as clothing and shoes 2.2 percent.

Facility investment added 8.8 percent on month and 11.8 percent on year on increased spending in machinery and transportation equipment.

The cyclical component of composite coincident index, which measures present economic activities, rose 0.5 point to 102.3 in August. The cyclical component of composite leading indicator, which predicts the turning point in business cycle, fell 0.2 point to 99.3.

“Domestic spending and service output improved but with the weak exports and manufacturing output, the economic recovery slowed,” said Eo Woon-seon, an official from Statistics Korea.

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