By Kang Seung-woo
Despite strong output growth, Korea is definitely losing recovery momentum with its leading economic indicator falling for the 12th straight month last December. The year-long contraction comes in stark contrast to a nearly 17 percent expansion in output on a year-on-year basis.
According to Statistics Korea Monday, the composite leading indicator (CLI) fell 0.2 percentage points from November 2010.
The CLI is a composite economic indicator that gauges how the economy will fare in six months by measuring current industrial output, housing and financial market conditions, and the gross domestic product (GDP).
“There are growing concerns over the faltering economic rebound,” said Lee Chang-sun, an economist at the LG Economic Research Institute (LGERI).
“Although the U.S. economy has been bouncing back lately, the Chinese monetary tightening may slow Korea’s recovery.”
Since the financial crisis sparked by the bankruptcy of Lehman Brothers in late 2008, Asia’s fourth-largest economy, has posted solid growth, pulling off an eight-year high of a 6.1-percent increase in 2010. In 2009, growth was a dismal 0.2 percent.
However, soaring inflationary pressure, sparked by rising commodity prices, has recently derailed the recovery.
The Bank of Korea (BOK) forecast last month that the country’s consumer prices would grow in the 4-percent range in the first quarter due to rising raw material costs and food prices.
The central bank’s inflation projection for 2011 is a three-year high of 3.5 percent, up from 2.9 percent in 2010, with its estimate for the first quarter of this year standing at 3.7 percent.
In addition, the nation’s consumer sentiment index, a gauge of consumers’ overall economic outlook, living conditions and future spending, edged down to 108 for January from 109 in December, according to the BOK.
Alerted by soaring prices, the government came up with comprehensive measures to fight inflation last month.
To make the nation’s situation worse, the January reading of its business survey index, manufacturers’ assessment of current business conditions, inched down to 90 from 92 in December. The figure, which has stayed below the benchmark 100 for six months in a row, is the lowest mark since December 2009, when it was 89, the BOK noted.
A reading below 100 means the number of companies expecting the economy will worsen outnumbers those forecasting an improvement.
The BOK attributed the decrease to soaring raw material prices and corporate expenses.
The silver lining for Korea is that its industrial output rose 9.8 percent in December, up 2.8 percent from the previous month, for gains in 18 consecutive months, according to the nation’s statistics office.
Industrial output expanded 16.7 percent from a year earlier for 2010.