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S. Korea Output Rises in Jan. After Three Months of Declines

South Korea’s industrial production rose in January after three consecutive months of declines as manufacturers of cars, machinery and mobile phones boosted output on improving prospects for demand.

Output increased 3.3 percent from December, when it dropped a revised 0.7 percent, Statistics Korea said today. The median estimate of 12 economists in a Bloomberg News survey was for a 0.5 percent drop. Production fell 2 percent from a year earlier, the first year-on-year decline since June 2009 and compared with a 4.6 percent drop estimated by economists.

South Korea’s economy, which grew the least in two years in the last quarter, may hit bottom in the first quarter before returning to a recovery path in the second, Finance Minister Bahk Jae Wan said last week. The Bank of Korea refrained from raising interest rates for an eighth month on Feb. 9 to support growth amid signs of easing inflation.

Today’s production figures and some recent purchasing-manager reports “suggest a pick-up in activity, and help alleviate partly the worries over the growth outlook,” said Frances Cheung, a senior strategist at Credit Agricole CIB in Hong Kong. “We have always been expecting an economic slowdown in Asia, but no recession. I think the latest data support our view.”

The won rose 0.2 percent to 1,121.80 to the U.S. dollar as of 9:40 a.m. in Seoul, according to data compiled by Bloomberg. The Kospi index advanced 1 percent.

World Economy Prospects

Manufacturers’ confidence on the prospects for March rose to a five-month high while consumer confidence rose to the highest level in three months in February, according to the latest central bank reports.

“The world economy is expected to show a modest recovery and South Korea’s export growth will likely recover although it’s difficult to predict a big improvement,” the finance ministry and central bank said today after officials from the two agencies met. Europe’s economy is “sluggish,” while the U.S. is showing signs of improvement and demand will be maintained in emerging economies, the officials said.

South Korea’s leading index of economic indicators rose 0.7 percent in January from December, when it gained 0.4 percent, today’s report said. Sales of consumer goods rose 0.8 percent from December and advanced 0.9 percent from a year earlier.

Statistics Korea said in a separate statement today that they revised the gauge system for the leading index, taking out capital goods imports and liquidity at financial companies and adding the international raw-material price index.

The total number of sub-indices for the leading index fell to nine from 10 after the change. The index was revised to better forecast business cycles and the impact of changing global economic conditions on the local economy, Statistics Korea said.

South Korea’s gross domestic product expanded 0.4 percent in the fourth quarter of 2011 from the previous three months, when it gained 0.8 percent, the central bank said on Jan. 26.

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