By Lee Hyo-sik
The economy is showing conflicting signs over whether it is still mired in a low-growth trap or is on a recovery path.
Industrial output fell in August at the steepest pace in six years as exporters struggled to ship their goods abroad due to the Japanese yen's continued weakness, which makes made-in-Korea products more expensive in the global market.
However, consumers here began spending more and companies have become more optimistic about their business conditions in the coming months.
According to Statistics Korea, Tuesday, the country's industrial production contracted 3.8 percent in August from July, the steepest month-on-month decline since December 2008 when the output plunged 10.8 percent. The output also fell 2.8 percent from a year earlier, raising concerns that Asia's fourth-largest economy is losing steam.
The manufacturing sector saw its production decrease 3.8 percent in August from July. In particular, automakers produced 16.2 percent fewer cars because of fewer working days and workers' partial strike. In tandem with sluggish industrial activities, corporate facility investments fell 10.6 percent in August, the sharpest drop since January 2003.
''Korea's industrial production declined in August because automakers and other manufacturers produced less because of fewer working days as workers took summer holidays,'' Statistics Korea official Jeon Baek-geun said. ''A partial strike also weighed down on auto production. But the output decline has little to do with the fundamentals of Korea Inc. We expect industrial activity to pick up if external factors remain favorable.''
In contrast to the output reduction, domestic consumption jumped sharply in August from a month earlier, a sign that consumers might have resumed spending. Spending came to a virtual halt following the sinking of the ferry Sewol in April, and had remained stagnant through July.
In August, retail sales jumped 2.7 percent, the steepest increase since March 2011.
''Household consumption had remained frozen after the Sewol disaster, but recent data show that consumers have begun spending again,'' Jeon said. ''People spent more during their summer vacation. In addition, consumers bought household items and agricultural products in August ahead of the Chuseok holidays, which fell in early September. It still remains to be seen whether the domestic consumption is on a recovery path, but the overall trend indicates consumers are now more willing to open their wallets.''
In addition to rising household consumption, domestic companies have become more optimistic about their outlook, another sign that the Korean economy may be gaining momentum.
The Bank of Korea said Tuesday that its business sentiment index (BSI), which measures manufacturers' outlook on their business situation for the coming month, rose to 74 in September from 72 in August, the first increase in four months. The index fell to 79 in May from 82 in April and had declined through August.
The BSI for October also rose to 78 from 74 for September.
Small- and medium-sized enterprises (SMEs) and domestic market-oriented companies became more confident about their business conditions, with their BSIs rising to 71 from 65 and to 76 from 71, respectively.
However, exporters and large companies remained neutral in September about their business outlook. Automakers became more pessimistic with their BSI falling to 87 from 91 because their outbound shipments have been hit hard by the strengthening won.
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Industrial output fell in August at the steepest pace in six years as exporters struggled to ship their goods abroad due to the Japanese yen's continued weakness, which makes made-in-Korea products more expensive in the global market.
However, consumers here began spending more and companies have become more optimistic about their business conditions in the coming months.
According to Statistics Korea, Tuesday, the country's industrial production contracted 3.8 percent in August from July, the steepest month-on-month decline since December 2008 when the output plunged 10.8 percent. The output also fell 2.8 percent from a year earlier, raising concerns that Asia's fourth-largest economy is losing steam.
The manufacturing sector saw its production decrease 3.8 percent in August from July. In particular, automakers produced 16.2 percent fewer cars because of fewer working days and workers' partial strike. In tandem with sluggish industrial activities, corporate facility investments fell 10.6 percent in August, the sharpest drop since January 2003.
''Korea's industrial production declined in August because automakers and other manufacturers produced less because of fewer working days as workers took summer holidays,'' Statistics Korea official Jeon Baek-geun said. ''A partial strike also weighed down on auto production. But the output decline has little to do with the fundamentals of Korea Inc. We expect industrial activity to pick up if external factors remain favorable.''
In contrast to the output reduction, domestic consumption jumped sharply in August from a month earlier, a sign that consumers might have resumed spending. Spending came to a virtual halt following the sinking of the ferry Sewol in April, and had remained stagnant through July.
In August, retail sales jumped 2.7 percent, the steepest increase since March 2011.
''Household consumption had remained frozen after the Sewol disaster, but recent data show that consumers have begun spending again,'' Jeon said. ''People spent more during their summer vacation. In addition, consumers bought household items and agricultural products in August ahead of the Chuseok holidays, which fell in early September. It still remains to be seen whether the domestic consumption is on a recovery path, but the overall trend indicates consumers are now more willing to open their wallets.''
In addition to rising household consumption, domestic companies have become more optimistic about their outlook, another sign that the Korean economy may be gaining momentum.
The Bank of Korea said Tuesday that its business sentiment index (BSI), which measures manufacturers' outlook on their business situation for the coming month, rose to 74 in September from 72 in August, the first increase in four months. The index fell to 79 in May from 82 in April and had declined through August.
The BSI for October also rose to 78 from 74 for September.
Small- and medium-sized enterprises (SMEs) and domestic market-oriented companies became more confident about their business conditions, with their BSIs rising to 71 from 65 and to 76 from 71, respectively.
However, exporters and large companies remained neutral in September about their business outlook. Automakers became more pessimistic with their BSI falling to 87 from 91 because their outbound shipments have been hit hard by the strengthening won.
