Bloomberg News

South Korea’s Output Rises as Exports Resist Global Slowdown

October 31, 2011

(Updates with economist quote in fourth paragraph.)

Oct. 31 (Bloomberg) -- South Korea’s industrial production rose last month after two straight declines as exports of cars and semiconductors withstood the global slowdown.

Output gained 1.1 percent last month from August, when it decreased 1.9 percent, Statistics Korea said today. The median estimate of eight economists in a Bloomberg News survey was for a 0.4 percent decline. Production rose 6.8 percent from a year earlier after gaining a revised 4.7 percent gain in August.

South Korea’s economic growth slowed in the third quarter as Europe’s debt crisis and a faltering U.S. recovery prompted companies to reduce spending. The deceleration may pressure the Bank of Korea to hold off from raising interest rates even as inflation remains above its target ceiling.

“The economy is slowing down but not falling into a downturn yet,” Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul, said before the report. “The central bank will likely stand pat on policy at least for this year amid high global uncertainties.”

The won completed a 3.9 percent gain last week to 1,104.88 per dollar in Seoul, according to data compiled by Bloomberg. The currency strengthened 4.3 percent against the dollar over the past three months.

Concerns are rising that weaker overseas demand will drag down the profits of the nation’s largest exporters.

Company Earnings

Samsung Electronics Co.’s third-quarter net profit decreased 23 percent from a year earlier as computer-memory chip and panel sales slumped. LG Electronics Inc. reported last week a wider-than-estimated quarterly loss as mobile-phone sales missed forecasts and earnings fell at its flat-panel unit.

Bank of Korea Governor Kim Choong Soo said last week the nation’s third quarter growth rate was lower than he expected, largely due to sluggish facility investment.

The economy’s performance will improve “significantly” in the fourth quarter on better weather, steady exports and a rebound in the U.S., said Kim Young Bae, another central bank official. Still, it will be hard to meet the bank’s 4.3 percent growth forecast this year made in July, he said last week.

South Korea’s leading index of economic indicators rose 1.5 percent in September from a year earlier, compared with a 2 percent gain in August, today’s report showed. Sales of consumer goods fell 0.2 percent from August and advanced 1.5 percent from a year earlier.

The nation’s exports, equivalent to half of the economy, expanded at the slowest pace in three months in September. Overseas shipment probably rose 10.9 percent in October from a year earlier, the smallest gain in two years, according to a Bloomberg survey.

Inflation in Asia’s fourth-largest economy surpassed the Bank of Korea’s 4 percent target every month so far this year.

The higher consumer prices combined with an economic slowdown could further undermine public support for President Lee Myung Bak ahead of parliamentary and presidential elections next year. Lee’s approval rate has halved from when he took office in February 2008. A lawmaker from Lee’s ruling party lost in Seoul’s mayoral election last week.

--With assistance from Sarina Yoo in Seoul. Editors: Ken McCallum, Lily Nonomiya

To contact the reporter on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net

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


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