June 26, 2014 / 11:57 PM / 5 years ago

UPDATE 1 -S.Korea May factory output worst in over 5 yrs on poor exports

* May ind output -2.7 pct m/m (Reuters poll: -0.5 pct)

* April output revised to -0.1 pct vs provisional +0.1 pct

* May data adds to signs of slowing economic recovery

SEOUL, June 27 (Reuters) - South Korea’s industrial output fell by the most in more than five years in May from the previous month, data showed on Friday, far missing market expectations and adding to signs the economic recovery may be losing steam.

The industrial output index fell by a seasonally adjusted 2.7 percent from April, the fastest monthly decline since a 10.5 percent drop in December 2008, data from Statistics Korea showed.

The median forecast in a Reuters survey of economists was for the industrial output index to decline 0.5 percent in May on-month, although the forecasts were wide from a 3.7 percent fall to a 1.0 percent gain.

Underscoring the weakness in manufacturing activity, the April industrial output index was revised down to show a 0.1 percent drop on-month, compared with the preliminary 0.1 percent gain reported, the data from Statistics Korea showed.

Analysts said poor exports in May led to the disappointing production activity across all the sectors, although some say distortions from long holidays during May exaggerated the situation.

“Basically weak exports in May led to soft output numbers. Half of what manufacturers make here are shipped abroad, so on top of fewer working days, that affected output,” said Park Chong-hoon, economist at Standard Chartered Bank Korea.

On a year-on-year basis, industrial output fell 2.1 percent in May after a revised 2.5 percent rise in April, also well below a median 0.3 percent increase tipped by the Reuters survey.

The statistics agency data also showed that service-sector output rose by a seasonally adjusted 0.6 percent in May on a monthly basis after a revised 1.2 percent decline in April.

Tepid global demand and relatively lacklustre consumer spending at home have raised concerns of a rapid loss of momentum in Asia’s fourth-largest economy this quarter following strong growth over the past year.

Consumer sentiment has lagged in recent months as the public mood darkened after the April 16 sinking of a ferry that killed more than 300 people. The deadly accident - the worst in two decades - hurt domestic tourism and related services, putting a dampener on overall economic activity.

The central bank’s latest monthly survey this week showed consumer sentiment rebounded in June after a sharp dip in May, but failed to return to levels seen before the April accident.

The country’s central bank chief, only in his third month in office, also flagged some signs of slippage in the local economy at his policy news conference earlier this month, saying the recovery in domestic demand had “paused”.

South Korea’s economy grew 0.9 percent each in the first quarter of this year and the fourth quarter of 2013, slower than a 1.1 percent gain in the third quarter of 2013 but well above the 0.5 percent average rise seen in 2012. (Reporting by Christine Kim and Choonsik Yoo; Editing by Shri Navaratnam)

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