SEOUL (Reuters) - South Korea’s February industrial production contracted sharply to a two-year low and missed forecasts by a large margin on shrinking output of cars and other key sectors, piling pressure on Asia’s fourth-largest economy as external demand wanes.
The industrial output index fell by a seasonally adjusted 2.6 percent from a month before to mark the biggest on-month fall since February 2017, and failing to sustain a recovery seen in the previous month.
The decline was steeper than the median 0.9 percent decline tipped in a Reuters survey.
Falling output of key exports including cars and petrochemical products drove the overall decline as shipments from South Korea posted their worst slump in nearly three years in February.
South Korea’s economy is facing increasing pressure from falling exports and cooling global growth as a slowdown in China and the Sino-U.S. trade war hit businesses already struggling with rising wages and worsening consumer sentiment at home.
Some of South Korea’s biggest exporters including Samsung Electronics have flagged concerns about earnings as chip prices fall and demand slows in China, the nation’s biggest trading partner.
Car production declined 3.2 percent from a month earlier, while that for transportation equipments and food items fell 8.0 percent and 4.8 percent, respectively.
The average factory operation rate slipped to 71.2 percent from 73.3 percent in January, in a sign manufacturers are restraining their production on slowing demand.
On a year-on-year basis, factory output dropped 2.7 percent last month.
Reporting by Cynthia Kim; Editing by Shri Navaratnam