S. Korean Output Unexpectedly Falls as Growth Forecast Cut
South Korea’s industrial production unexpectedly fell in February, signaling that a recovery in Asia’s fourth-largest economy may be slower than expected as a weaker yen threatens exports.
Output fell 0.8 percent last month from January when it fell 1.2 percent, Statistics Korea said today. The median estimate of 10 economists in a Bloomberg News survey was for a 0.3 percent gain. Production fell 9.3 percent from a year earlier, a decline partly attributable to February having fewer working days this year because of the Lunar New Year holiday.
Today’s output decline may bolster the government’s case for a larger supplementary spending package after Finance Minister Hyun Oh Seok announced plans for stimulus yesterday. The government cut the 2013 growth outlook from 3 percent to 2.3 percent as South Korean exporters including Samsung Electronics Co. and Hyundai Motor Co. grapple with a won that’s risen 17 percent against the yen in the last year.
“We’re in a recovery, but surely not a strong one and the ups and downs in the past few months are showing mixed signs which the government isn’t happy about,” said Kwon Young Sun, a Hong Kong-based economist at Nomura International Ltd. “The decline in output data today fits in line with the need for a stimulus the government has called for.”
South Korea’s economy expanded at the slowest pace last quarter since the global recession. At the same time, an index measuring manufacturers’ expectations for April rose to 80, the highest level since July, from 76 for March, the Bank of Korea said in a statement today. The country’s consumer sentiment index rose to 104 in March, the highest level since May 2012.
The government yesterday also cut projections for the current account surplus this year to $29 billion from $30 billion, while reducing its inflation forecast to 2.3 percent from 2.7 percent.
The Bank of Korea will announce its revised 2013 economic growth forecast in second week of April, Governor Kim Choong Soo told reporters in Kuala Lumpur yesterday. Its last forecast was for 2.8 percent growth.
“The economy is not contracting, but there is no direction in terms of sentiment,” said Sun Yoo, a Seoul-based economist at Woori Investment & Securities Co. “There is a big chance that the Bank of Korea will cut the benchmark interest rate in April.”
The won fell 0.03 percent to 1,113.43 to the dollar as of 12:33 p.m. in Seoul today. The benchmark Kospi index rose 0.73 percent to 2008.05.
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