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South Korea's Industrial Output Rises for 12th Month, Exceeding Forecasts
South Korea’s industrial output rose more than forecast in June, expanding for a 12th month, showing resilience to risks from advanced economies and providing more reason to keep raising rates.
Output gained 16.9 percent from a year earlier, after rising a revised 21.7 percent in May, the statistics office said in Gwacheon today. That compared with the median estimate for a 16.5 percent gain in a Bloomberg News survey of eight economists. Production increased 1.4 percent from May.
The economy grew a faster-than-expected 1.5 percent last quarter as companies from Samsung Electronics Co. to Hyundai Motor Co. reported record earnings, helped by a weakening won that boosted export competitiveness. The expansion is bolstering the case for a further increase in interest rates after the Bank of Korea raised borrowing costs on July 9 for the first time since the global financial crisis.
“The economy will sustain its growth momentum in the second half as exports remain strong and local demand picks up,” Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul, said before the release. “The BOK may raise rates by another 25 basis points in September and November unless the global economy falls into a double-dip recession.”
The won was little changed at 1,183.3 per dollar as of the 11:10 a.m. in Seoul, according to data compiled by Bloomberg. The currency has weakened 6.3 percent in the past three months, Asia’s worst performance. The benchmark Kospi stock index fell 0.7 percent to 1,758.17.
Won Rally
Recent signs the economy is withstanding global risks have spurred demand for the nation’s assets, with the won heading for a gain of about 3 percent in July, the biggest monthly advance since September 2009.
The currency reached a five-week high of 1,181.33 on July 27 before retreating the next day as traders said the Bank of Korea bought dollars to counter the appreciation.
The government’s efforts “to keep the won weak for exporters” can offset any slowdown in South Korea’s big export markets, such as the U.S., as overseas shipments drive economic growth, said Park Sang Hyun, an economist at HI Investment & Securities Co. in Seoul.
South Korea’s current-account surplus widened to a one-year high in June on overseas demand for the nation’s cars, consumer electronics and semiconductors. The windfall was $5.04 billion and will be similar in July, compared with a revised $3.82 billion in May, the central bank said this week.
Record Earnings
The nation’s $929 billion export-led economy will grow 5.9 percent this year, more than the 5.2 percent predicted in April, the central bank said on July 12. Exports, which make up about half the economy, surged 30.1 percent last month.
Samsung, Asia’s biggest maker of semiconductors, flat screens and mobile phones, this month reported record earnings for the second quarter, as a recovery in demand for computer- memory chips drove up prices.
Hyundai Motor Co., South Korea’s largest automaker, said yesterday it expects to beat its annual revenue forecast after posting record profit on brisk overseas sales that offset sluggish domestic demand.
A leading index of economic indicators, which forecasts business activity, rose 7.0 percent in June from a year earlier, compared with a revised 7.9 percent gain in May, today’s report showed.
Sales of consumer goods gained 2.4 percent last month from May and climbed 3.8 percent from a year earlier. Investment in factories increased 24.2 percent from the same period in 2009.
The Bank of Korea raised the benchmark rate to 2.25 percent this month from a record-low 2 percent. Asian central banks from Taiwan to Thailand and India have also increased borrowing costs as price pressures outweigh concerns about the impact on the global recovery from Europe’s sovereign-debt crisis, elevated U.S. unemployment and a slowdown in China.
To contact the reporters on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net; William Sim in Seoul at wsim2@bloomberg.net
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