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South Korea April industrial output weak, clouds economic outlook
May 30, 2014 / 12:11 AM / 3 years ago

South Korea April industrial output weak, clouds economic outlook

SEOUL (Reuters) - South Korea’s industrial output rose at a much slower pace than expected in April, dampening the economic recovery, as temporary factors such as a sinking of a ferry last month had a chilling effect on consumer sentiment.

The combination of weak consumption and tepid manufacturing activity could slow the recovery in Asia’s fourth-largest economy, but analysts say it’s too early to draw firm conclusions for the rest of the year.

Industrial output edged up by a seasonally adjusted 0.1 percent in April from the previous month, following a revised 0.9 percent rise in March, Statistics Korea data showed. The revision didn’t have an impact on the provisional figure for March.

April’s reading was the second consecutive monthly gain, but was still some way off from recovering a combined 2.1 percent loss suffered during January through February.

“Today’s figures don’t look strong but as a whole indicate the economy is softening instead of slipping into a slump,” Park Sang-hyun, chief economist at HI Investment and Securities.

“There were some temporary events affecting the economy and that means we have to wait for May figures to be more confident about where the economy is heading,” he said.

Park was referring to a ferry accident that killed more than 300 passengers, which darkened the public’s mood, slowing domestic tourism and retail spending. A temporary ban on mobile carriers taking on new customers in April also affected business activity.

The median forecast in a Reuters poll of analysts was for April industrial output to have risen by a seasonally adjusted 0.6 percent on-month, with forecasts ranging from a 0.5 percent fall to a 1.2 percent rise.

On an annual basis, industrial output rose 2.4 percent in April after a revised 2.6 fall in March, the data showed, compared to a median 3.2 percent rise tipped in the Reuters survey.

The data comes on the heels of news that the U.S. economy contracted for the first time in three years in the first quarter as it buckled under a severe winter. But there are signs it has rebounded and economists say it could grow as much as 4 percent in the current quarter.

A rebound in the U.S., South Korea’s second-biggest export market, will be crucial to cementing a recovery at home especially given a slowdown in China’s economy.

The outlook for manufacturers doesn’t look rosy, however. A central bank survey out earlier in the day showed business sentiment for June fell to a 10-month low

The statistics agency data also showed that service-sector output slipped a seasonally adjusted 1.0 percent in April on a monthly basis after a revised 0.5 percent gain in March.

The output data comes ahead of May trade data on Sunday. Economists from a Reuters poll have tipped exports to have grown just 1.0 percent from a year ago, as external demand still remains fragile, on top of fewer working days in the month compared to a 15-month high seen in April.

Editing by Choonsik Yoo & Shri Navaratnam

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