South Korea's Factory Output Rises Less Than Expected
South Korea's industrial output rose less than economists expected in May, adding to signs the economy's expansion will slow this year.
Production climbed 8.3 percent from a year earlier, easing from April's revised 10.4 percent gain, the National Statistical Office said today in Gwacheon. That fell short of the 9.8 percent median estimate in a Bloomberg News survey of 16 economists. Output slipped 0.6 percent from April.
South Korea's stock index fell after the report showed production rose by the least in six months and separate figures signaled manufacturers' confidence for July declined to a three- year low. Companies are paring output of mobile phones, televisions and cars as record fuel prices damp domestic demand and the global economic expansion eases.
“Higher fuel costs are taking a toll on the economy, especially domestic demand,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. “The slowdown may get worse if oil prices remain high.''
The Kospi index fell 0.6 percent to 1,674.67 at 1:51 p.m. in Seoul, taking this year's decline to almost 12 percent. Shares in Samsung Electronics Co., the world's second-largest maker of mobile phones, slipped 2.8 percent. The nation's won dropped 0.1 percent to 1,042.75 versus the dollar.
Sales of consumer goods decreased 0.6 percent last month from April, today's report showed, showing that domestic demand is faltering. Investment in factories fell 2.5 percent from a year earlier.
Economy Cools
Economic growth in South Korea will slow to 4.1 percent this year, the least since 2003, from 5 percent last year, the International Monetary Fund forecast this month.
President Lee Myung Bak is facing a slump in popularity as higher fuel prices increase living costs for South Koreans, already burden with a record amount of debt.
Lee's approval rating has dropped more than half to 21 percent since he took office in February, according to a survey by newspaper Chosun Ilbo.
The Finance Ministry and the Bank of Korea are due to release semi-annual reports this week, with revised forecasts for economic growth and inflation to reflect rising fuel prices. South Korea is the world's fifth-largest importer of crude oil.
Consumer prices probably jumped 5.4 percent in June from a year earlier, the highest since 1998, adding pressure on the central bank to raise interest rates, a Bloomberg News survey of economists showed. The data is due 1:30 p.m. in Seoul tomorrow.
Chinese Demand
Shipments to China, the Middle East and Latin America, buoyed in part by a weaker won, have helped South Korea weather the domestic slowdown and the U.S. economic slump.
Exports, which powered almost all of the economy's first- quarter expansion, climbed 20.2 percent in June from a year earlier, according to a survey of economists. The government releases the report tomorrow at 10 a.m.
Bank of Korea Governor Lee Seong Tae and his colleagues left interest rates at a seven-year high of 5 percent this month, saying the risk of faster inflation outweighs concerns that economic growth is slowing. The bank next meets on July 10.
A leading index of economic indicators, which forecasts business activity, rose 2.3 percent from a year earlier, compared with a 2.8 percent gain in April.
Output of audio, video and telecommunication products rose 26.9 percent from a year earlier, easing from April's 32.6 percent gain.
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