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Auto output grows, but investment slows down

Oct 03,2018
Despite rising doubts over Korea’s economic growth this year, output by the manufacturing industry has continued to grow as of August largely thanks to improvement in automobile exports.

However, companies are continuing to cut back investments on plants and machinery.

According to Statistics Korea on Tuesday, Korea’s industrial output compared to a year ago has grown 1.5 percent. This is stronger growth than the 1.3 percent recorded in July. Industrial output has been on the rise since June.

The statistics agency contributed the growth in output to the improvement in automobile exports in August and swift wage negotiations between automobile manufacturer management and labor unions.

Automobile industry production in August grew 9.6 percent year-on-year, the first growth since February, when output plummeted to 19.8 percent. Compared to the previous month, production increased 21.8 percent.

“The [overall] output has improved largely because of the increase in automobile production,” said Ou Un-seon, director of Statistics Korea’s industry statistics division. “The government’s lowering of individual consumption taxes [on automobiles in mid-July] helped sales in the domestic market to increase, but we believe the increase in exports has had a larger contribution.”

While exports shrunk 0.6 percent year-on-year, they grew 1.9 percent compared to the previous month. Domestic sales grew 2.9 percent year-on-year and 0.5 percent from July.

Thanks to the automotive industry, the mining and manufacturing industry’s production also grew. From last year, production grew 1.4 percent, more than the 0.5 percent in July. Even when compared to the previous month, production grew 2.5 percent, up from 1 percent in July.

On the contrary, semiconductor industrial output fell 6.2 percent from the month before. Statistics Korea’s director, however, said this was not because of falling production in the semiconductor industry but rather due to semiconductor manufacturers selling products that have piled up from previous months.

“We’re not looking [at the month-on-month drop] seriously as shipment has increased while the stockpile [of semiconductors] has fallen,” said Ou.

The service industry, however, saw its growth slow down. In August, service industry output grew 1.6 percent year-on-year, a drop from 2.1 percent reported in July. But when compared to the previous month, it remained the same as in July at 0.1 percent.

However, the biggest concern was the continuing decline in investment. Investment in plants and machinery by companies has fallen 11.2 percent year-on-year, worse than the 10.1 percent drop in July. Investment has been falling for four consecutive months.

While investment in the public sector grew, the private sector fell.

“Investment in transportation-related equipment, such as automobiles, has increased,” said Ou of Statistics Korea. “But like in previous months, investment [in August] continued to fall as investment in special equipment, such as semiconductors, has shrunk.”


BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]