South Korea’s industrial output shrank for the second straight month in July, raising concerns the country’s economy might be faltering in the face of headwinds from the eurozone debt crisis and a global slowdown, a government report showed Friday.
According to the report by Statistics Korea, production in the mining, manufacturing, gas and electricity industries fell 1.6 % in July from a month earlier following a revised 0.6% decline in June.
From a year earlier, the output inched up 0.3 % but it decelerated from a revised 1.4% on-year gain tallied in the previous month.
The country’s service sector production, meanwhile, increased 1.5% on-year in July and inched up 0.7% from the previous month, the report showed.
“It is inevitable to see a shrinkage in output when the current market situations are faltering and exports are declining,” said Jun Min-kyu, an economist at Korea Investment & Securities Co. “With the outlooks for the global economy remaining bleak, things will likely stay this way for the time being.”
The data comes as South Korea’s economy, heavily dependent on exports, has been faced with shrinking overseas demand for its goods.
Exports, which account for more than 50 % of the economy, fell 4.1% in July from a year earlier, according to the central bank.
The government earlier predicted the country’s exports will grow 3.5% this year, but it is far lower than a 19% advance registered a year earlier.
Wary of gloomy market conditions, the government cut its 2012 growth forecast from 3.7% to 3.3% last June.
Concerns seem to be deepening further after the central bank earlier announced that the country’s economy grew 0.4% on-quarter in the April-June period, slowing from a 0.9 % gain in the first quarter.
This is the slowest growth since a 0.3% expansion in the fourth quarter of last year. The economy grew 2.4% from a year earlier.
Manufacturing, among other things, appears to be bearing the brunt of faltering market conditions, dampening overall output activities last month.
The report showed the average factory utilization rate in the sector fell 0.9 percentage points to 77.2 %, the lowest level in seven months. Corporate investment and consumption, however, seems to be improving apparently thanks to the government-led efforts to boost domestic demand.
Facility investment grew 2.5 % in July from June, a turnaround from a 5.9% contraction in the previous month. Retail sales also increased 3.4 % following a 0.5% decline in the previous month, the report showed.
The government earlier said that it plans to unveil additional fiscal spending plans soon aimed at helping bolster domestic demand. In June, the finance ministry announced an 8.5 trillion won worth of fiscal spending.