Industrial output weakest in 9 months

By Yoon Ja-young

The country’s industrial output suffered its biggest fall in nine months in October due to a sharp drop in exports to China, according to Statistics Korea, Monday.

Consumption, however, made the biggest jump in 57 months thanks to government-led stimulus efforts such as Korea Black Friday.

Industrial output decreased 1.3 percent in October from the previous month, the biggest decrease since January when it dipped 1.9 percent.

The total output had been picking up since June when it marked 0.6 percent growth, jumping 2.5 percent in September. However, it started decreasing in October due to sluggish exports.

The country’s exports fell 15.9 percent in October from a year ago. This is the steepest fall since August 2009, when exports dipped 20.9 percent because of the global financial crisis.

Due to the sluggish exports, production in the mining, manufacturing, gas and electricity industries decreased 1.4 percent in September. Production in the chemical industry dipped 4 percent and automobiles also saw a 2.8 percent fall in production.

The Institute for International Trade explained that the country’s exports have been dipping due to the sluggish global economy.

“The global economic growth rate fell to the 3 percent range recently from the 5 percent range in the past,” said Mun Byung-ki, a researcher at the institute. “Global commodities trade increased by a mere 2.8 percent from the previous year compared to a 5.4 percent rise in 2011.”

Global oversupply and competition as well as falling international oil prices are decreasing exports worldwide. He pointed out that export prices fell 15 percent this year.

China’s slowdown and changes in trading structure especially hit Korea’s exports there.

“China has been growing on average 9.9 percent annually during the past 30 years, but the growth rate fell to 7.4 percent in 2014, and to 6.9 percent in the third quarter this year,” he said, pointing out that Korea’s stake is shrinking further in the country as Chinese businesses rely more on domestic procurement of materials and components for their exports.

Despite the sluggish output, consumption is sunny.

Retail sales expanded 3.1 percent in October from the previous month, marking the biggest rise since January 2011.

“Government-led consumption stimulus measures such as Korea Black Friday were effective,” said Choi Jung-su, director of the short-term industrial statistics division.

While sales of perishable goods such as food and beverages decreased 1.6 percent, sales of durable goods such as home electronics jumped 7.7 percent. Quasi-durable goods such as garments also saw an 8.1 percent jump in sales.

“While domestic consumption is continuing and expanding its recovery, sluggish exports are having a negative effect on production and investment,” said the Ministry of Strategy and Finance in an analysis released to the media, adding that external uncertainties remain.

The ministry also said that the government will strengthen efforts to promote exports so that the economic recovery can pick up momentum.