* Factory output falls 1.7 pct from Sept
* Analysts saw a 0.1 pct decline in a Reuters poll
* Output hurt in part by scrubbing of Galaxy Note 7
(Adds analyst quote, more details)
By Cynthia Kim
SEOUL, Nov 30 South Korea's tepid factory output
sagged even further in October as production of electronic
components and telecommunications equipment fell, clouding the
economic growth outlook.
A finance ministry official attributed the output drop in
part to the cancellation of Samsung Electronics'
Galaxy Note 7, which would weigh on production across different
elements of the supply chain.
The average factory operation rate fell to 70.3 percent in
October from 71.6 percent in September, staying close to the
lowest level since the global financial crisis of 2009.
In monthly terms, industrial output declined 1.7 percent in
October on a seasonally adjusted basis, government data showed
The drop comes after a revised 0.6 percent gain in
September on monthly terms, and is weaker than a 0.1 percent
decrease estimated by analysts in a Reuters poll.
On an annual basis, industrial output fell 1.6 percent in
October after a revised 1.7 percent drop in September, compared
with a median 2 percent decline tipped in the same survey.
South Korea's is gripped by a political scandal involving
President Park Geun-hye and some of the nation's biggest
companies, which has raised fears of policy paralysis at a time
when exports are falling.
Speaking at a policy meeting earlier on Wednesday, Finance
Minister Yoo Il-ho said the political scandal has increased
downside risks to the economy as it undermined consumer and
investor sentiment in broad terms.
"Output figures are expected to remain sluggish for the time
being," Lee Sang-jae, an Eugene Investment & Securities
economist said after the data was issued.
Lee added that it was hard to expect a solid recovery at
least until the first quarter of 2017 as "there is an outburst
of uncertainties at home and abroad."
Production of telecommunication equipment dropped 18.1
percent from September while output of electronic components
fell 3.7 percent, driving the overall index down, although car
production rose 4.7 percent from a month earlier.
Service sector output saw a 0.2 percent fall in October from
a month earlier after a revised 0.7 percent decline, in a sign
that the outlook is worsening even for one of the few bright
spots this year.
SHIPPING SECTOR RESTRUCTURE BITES
Analysts say the ongoing restructuring of marginal
companies across shipbuilding and shipping industries will
restrain production and further reduce the factory utilization
rate, which is already at a cyclical low.
Daewoo Shipbuilding & Marine Engineering Co Ltd,
one of the world's three largest shipyards, is currently
suffering from a big drop in orders, while the nation's biggest
shipper Hanjin Shipping Co Ltd is under court
"Given that those sectors are undergoing restructuring,
their priorities through the end of December would be to push
out inventories or finish whatever they have started before the
year ends," said Moon Jung-hui, an economist with KB Investment
(Reporting by Cynthia Kim, additional reporting by Yun Hwan
Chae; Editing by Eric Meijer)