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Asia's fourth-largest economy hit hard by falling global chip, auto demands
By Lee Kyung-min
Korea's industrial output dropped at the steepest rate in six years in February as semiconductor, auto and other manufacturers reduced production in line with falling global demand, data showed Friday.
According to Statistics Korea, industrial output slid 1.9 percent compared to January.
The decline was the biggest since March 2013, when industrial output fell 2.1 percent from a year earlier.
In particular, facility investment slumped 10.4 percent, the steepest decline in five years and three months, mostly due to reduced investment in machinery and transport equipment.
The sharp drop followed a 1.9 percent increase in January, but was largely in line with a previous decline that continued for two consecutive months. The figure dropped 4.7 percent in November and 2.8 percent in December 2018.
Retail sales fell 0.5 percent from a month earlier due to decreased sales of food and beverages and automobiles. It dropped 2 percent compared to a year earlier.
While manufacturing posted an increase in telecommunication and broadcasting equipment, and pharmaceuticals, it failed to offset the fall in automobiles and other transport equipment.
The two indicators measure the country's business cycle, and both have fallen for the past nine months. But it is not cause for a blind "fatalistic view," according to the statistics office.
"Analysis of the two indicators should be carried out in the context of how much they fell," a statistics official said. "The 1.9 percent drop is not too severe compared to that observed during the Asia Financial crisis when it was about 5.5 points, with the figure about 2.2 in the early 2000s when the economy was sluggish."
However, such a comparison fails to show the overall downward pressure the economy is experiencing, according to Yonsei University economist Sung Tae-yoon.
"Key economic indicators have consistently pointed to economic conditions that invite concern," he said. "Despite the government's understandable efforts to maintain a positive outlook, business and consumers will continue to feel the pinch."
With the semiconductor industry likely to continue to slow, Korea could be facing an economic slowdown, he added,
"Korea has been bolstered by brisk chip sales on solid global demand, but the possibility of the county enjoying what has been a super cycle is becoming remote given the recent signs of an apparent softening in global demand," he said.
Facility and construction investment was dipping faster, he added, with the production cycle also showing signs of slowing.
The Ministry of Economy and Finance said major economic policies would be implemented to boost exports and investment.
Meanwhile, Friday's figures are the latest indicators of a further downturn following customs data early this month that showed a steep decline in exports.
Korea Customs Service data showed the value of exports in the first 10 days of this month was down 19.1 percent from a year earlier.
