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Korea Industrial Production Slides as Europe Hits Exports

Aug. 31 (Bloomberg) -- South Korea’s industrial production fell for a second month in July as a global slowdown undermines growth in Asia’s fourth-largest economy.

Output fell 1.6 percent from June when it dropped 0.6 percent, Statistics Korea said today. The median estimate of 12 economists in a Bloomberg News survey was for a 0.9 percent decline. Production rose 0.3 percent from a year earlier.

South Korean manufacturers’ confidence is near the lowest level since the global financial crisis as European austerity measures and a slowdown in China limit exports. HSBC Holdings Plc says the central bank may cut interest rates on Sept. 13 after a surprise reduction in July.

“The contraction in export growth will have weighed on the country’s manufacturing sector, causing a further slowdown in industrial production,” Ronald Man, a Hong Kong-based analyst at HSBC said before the release. The economy may “bottom out in the third quarter,” Man said.

Lee Yong Sup, an opposition Democratic United Party lawmaker, said this week that his party will drop a push for an extra budget to spur growth, because it’s now too late in the year.

Signs that the economy is cooling include an Aug. 29 report that the current-account surplus climbed to a record in July because of declining imports. An index measuring manufacturers’ confidence for September was at 75 from 70 the previous month, the only readings below 80 since 2009.

Posco Challenge

Posco, Asia’s third-biggest steelmaker by output, is among South Korean companies facing weakness in demand.

The second half “will be worse than expected early this year because of weak demand from construction and shipbuilders,” Chief Financial Officer Park Ki Hong told investors in Seoul last month. “Still, our profitability in the second half will be better than the first half, driven by falling raw material prices.”

Asia’s fourth-biggest economy grew 2.4 percent in the second quarter from a year earlier, the slowest pace in almost three years, according to a preliminary estimate. Imports fell 5.4 percent in July from a year earlier, as exports also tumbled.

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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