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(3rd LD) S. Korea's industrial output rebounds in May

All News 16:07 June 30, 2016

(ATTN: ADDS comments from BNP Pariba's report in last 5 paras)

SEJONG, June 30 (Yonhap) -- South Korea's industrial output rebounded in May, snapping two straight months of on-year decline on the back of increased production in chips and petroleum products, a government report showed Thursday.

Production in the mining, manufacturing, gas and electricity industries expanded 4.3 percent last month from a year ago, according to the report by Statistics Korea. From a month earlier, industrial output also gained 2.5 percent.

The May figure represents a turnaround from 0.5 percent and 2.6 percent on-year drops in March and April, respectively.

Production in the service sector also expanded 3.4 percent from a year earlier and edged up 0.1 percent on-month.

For all industries, output jumped 4.8 percent on-year in May and climbed to a 15-month high of 1.7 percent from a month earlier, the report said.

Statistics Korea attributed the rebound in industrial output to the eased pace of declines in exports, which marked a 6 percent on-year fall in May, narrowing from 11.2 percent tallied in April.

The latest data also showed that an index that measures the volume of exports jumped 5.8 percent on-year in May, the agency added.

"The mining and manufacturing sector is directly affected by exports," said Eo Woon-sun, director of the short-term industrial statistics division at Statistics Korea. "One more working day than a year earlier also lent support to the 4.3 percent on-year jump last month."

The country's exports have decreased for 17 straight months since January last year, the longest negative streak in Korea's history. And they are expected to extend the negative run to 18 months in June, as the latest customs data show that outbound shipments slumped 20.8 percent for the first 20 days of the month.

Production of semiconductors largely contributed to the uptick, as it vaulted 28.3 percent from a year earlier, along with a 12.3 percent jump in petroleum goods output and a 3.2 percent gain in automobiles.

May's average plant utilization in the manufacturing sector reached 72.8 percent, up 1.5 percentage points from a month earlier.

Meanwhile, domestic consumption continued its upbeat pace last month to rise 5.1 percent on-year, following a four-month high, 5.7-percent on-year jump in March, on the back of robust sales of durable goods like passenger cars.

Car sales soared 20.8 percent in May from a year ago on the back of the government-led excise tax cut program that resumed in January to boost consumption.

From a month earlier, consumption also edged up 0.6 percent, turning around from a 0.5 percent fall in April. The on-month figure hit 4.4 percent in March, the highest monthly figure since February 2009 when it touched 5 percent.

The finance ministry said industrial output and domestic consumption may backtrack to some extent in June as consumer and business confidence remained sluggish in recent months due to rising uncertainties at home and abroad.

"The government will move swiftly to draw up an extra budget and implement planned economy-boosting measures to battle possible downside risks inside and outside the country," said the ministry.

Earlier this week South Korea unveiled a set of stimulus programs, including a 10 trillion won (US$8.69 billion) supplementary budget, to buttress Asia's fourth-largest economy that has been suffering from waning exports and flaccid domestic demand.

It cited that rising financial uncertainties throughout the world, triggered further by the recent British vote to leave the European Union, or Brexit, are feared to further drag down demand here.

PNP Baribas, a France-based investment bank, also took a cautious approach, as South Korea's industrial output data have been highly volatile over the past year thanks to an up-and-down production of chips and cars, and their overseas demand.

"Caution is needed in interpreting the headline print," the company said it a report. "Korea's production data have been highly volatile over the past year, heavily distorted by the spurts of the production of motor vehicles and semiconductors."

It expected the South Korean fiscal and monetary authorities to come up with more aggressive measures to revive a weak recovery momentum.

"Data overall show signs of improvement, but more is needed to alleviate policy pressure," said the report. "May data should not dissuade a Bank of Korea rate cut."

The South Korean central bank slashed the base rate to a fresh record low of 1.25 percent in early June, saying that the economy needs a further support.

brk@yna.co.kr
(END)

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