Bloomberg News

S.Korea Output Growth Slows, GDP Expands Less Than Estimated

March 29, 2012

South Korea’s industrial production rose at a slower pace in February and the nation’s economy expanded less than the central bank initially estimated in the fourth quarter.

Output rose 0.8 percent in February compared with a revised 3.2 percent gain in January, Statistics Korea said today. The median estimate of 10 economists in a Bloomberg News survey was for a 0.3 percent drop. Gross domestic product grew 0.3 percent in the three months to December from the third quarter, compared with a January estimate of 0.4 percent, the Bank of Korea said.

South Korea’s economy, which expanded the least in two years last quarter, may bottom in the first three months of the year before returning to a recovery path in the second quarter, Finance Minister Bahk Jae Wan said last week. Improvements in global demand may aid the nation, with International Monetary Fund official David Lipton saying this week that he expects modest growth in the U.S., a mild recession in Europe and a soft landing for China.

“We’re apparently going through a trough but the speed and magnitude of an economic recovery highly hinges on global demand,” Yoon Yeo Sam, a fixed-income analyst at Daewoo Securities Co. in Seoul, said before the releases. “The Bank of Korea will likely stay pat for a considerable period of time to support growth amid easing inflation pressures.”

Exports Drop

The won rose 0.1 percent to 1,135.50 per dollar as of 10 a.m. in Seoul, according to data compiled by Bloomberg. The Kospi Index declined 0.3 percent.

Slower industrial output growth in February compared with January was largely due to production declines in telecommunications, non-metallic minerals and electric equipment, according to today’s report from Statistics Korea.

“Output rebounded quite sharply in January and that’s why output growth slowed in February,” Jeon Baek Geun, director at Statistics Korea, told reporters in Gwacheon today. “The overall conditions seem to be improving from late last year.”

Exports dropped 2.7 percent in the fourth quarter from the third, when shipments abroad gained 2.1 percent, today’s central bank report showed. Corporate investment in facilities fell 4.3 percent from the previous quarter, when it slid 1.8 percent. Private consumption decreased 0.4 percent after advancing 0.2 percent.

Growth Forecasts

The BOK forecast in December that the economy will grow 3.7 percent in 2012 and 4.2 percent in 2013, following 3.6 percent growth last year.

South Korean manufacturers’ confidence rose to the highest level in six months and the consumer sentiment index climbed to a four-month high on signs that the outlook for global growth is improving, according to central bank reports this week.

While the European Central Bank’s injection of more than 1 trillion euros ($1.3 trillion) into the banking system has calmed markets, the best six months of job growth since 2006 in the U.S. are boosting the optimism of consumers whose spending accounts for 70 percent of the economy.

“We expect the first-quarter economy to grow a little bit faster than earlier expectations on government spending,” Kim Young Bae, director general at the central bank’s statistics department, told reporters today in Seoul.

To contact the reporters on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net; Seonjin Cha in Seoul at scha2@bloomberg.net

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


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