S. Korean Output Unexpectedly Climbs on Domestic Demand

South Korea’s industrial production unexpectedly rose in December as strength in domestic demand offset weakness in exports.

Output rose 1 percent from November, compared with the median estimate of nine economists in a Bloomberg News survey for a 1.5 percent fall. Production gained 0.8 percent from a year earlier.

South Korea’s government is frontloading budget spending in the first half to spur economic growth as won gains and yen weakness aid export rivals in Japan. Asia’s fourth-largest economy may grow about 3 percent this year after a 2 percent expansion in 2012, according to Hoe Ee Khor, the country mission chief for the International Monetary Fund.

“Output is better because of an improving domestic economy,” said An Ki Tae, a Seoul-based economist at Woori Investment & Securities Co.

Separately, the current account surplus narrowed to $2.3 billion in December on decreased overseas shipments of steel, electronics and cars, compared with a revised record surplus of $6.9 billion in November, the Bank of Korea said in a statement in Seoul today. The current account is the broadest measure of trade, tracking goods, services and investment income.

The won closed at 1,082.60 yesterday in Seoul. Gross domestic product grew 0.4 percent in the fourth quarter, picking up pace after two periods of deceleration.

China, U.S.

Economic pickups in China and the U.S. are boosting the outlook for South Korean shipments and declines in the won in the second half of this month have eased pressure on exporters after the currency rose more than 8 percent against the dollar last year.

“Sustained improvements in China and signs of stronger U.S. conditions will support manufacturing conditions, even if growth in Europe remains sluggish,” Ronald Man, a Hong Kong- based analyst at HSBC Holdings Plc, said before the release.

Samsung Electronics Co. said the stronger won may cut operating profit by at least 3 trillion won ($2.8 billion) this year after reporting a 76 percent increase in fourth-quarter profit on Jan. 25.

To contact the reporter on this story: Cynthia Kim in Seoul at ckim170@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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