South Korea's Output Drops More Than Estimates as Exports Slump

  • Factory output falls 1.9% y/y, more than 0.6% drop in survey
  • Exports fell for 14th month through Feburary on slowing demand

South Korea’s industrial output dropped even more than estimated in January as a slump in exports and the end of temporary tax benefits weighed down production.

  • Output dropped 1.9 percent from a year earlier (estimate -0.6 percent)
  • Decline was 1.8 percent from December (estimate -1.0 percent)
  • Notable drops in electronic parts, devices and machines

Falling production is a risk to the government’s target of achieving 3.1 percent growth this year. Overseas shipments dropped for a 14th straight month in February as the export-dependent economy suffered from weaker demand in key markets including China.

The won has depreciated, adding to worries about capital outflows that are being driven by speculation that U.S. interest rates will rise and risks related to North Korea.

"Its hard to expect a major recovery in production, as output and exports go hand in hand," said Ma Ju Ok, an economist at Kiwoom Securities Co. in Seoul. "Part of the weakness was also from consumption tax cuts that stopped."

"The slowing growth in Chinese manufacturing production also has had wider transmission effects throughout the Asian manufacturing supply chain," Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight said in Singapore before the data was released.

The nation’s finance ministry expects improvement in industrial production and investment in February because the export drop then was smaller, it said in a statement.

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