South Korea’s industrial production tumbled a record 25.6 percent in January as exporters cut output and idled factories amid dwindling demand from the US, Japan and Europe.
Output fell for a fourth month after dropping 18.7 percent in December, the statistics office said yesterday in Gwacheon. That compares with a median estimate of a 26.4 percent decline in a Bloomberg News survey of eight economists. From a month ago, output gained 1.3 percent.
Exports posted the longest run of declines since 2002, the government also reported yesterday, adding to signs the economy is headed for its first recession since the Asian financial crisis a decade ago. Posco, the region’s third-largest steelmaker, said it may cut production by 6 percent this year should a slump in sales to carmakers and builders continue until June.
“A decline in global demand is cutting production and damping confidence,” said Ryu Seung-sun, an economist at HMC Investment Securities Co in Seoul.
Exports, which make up about 60 percent of GDP, fell 17.1 percent last month from a year earlier.
Asia is being hit hard by the global recession as the region is almost twice as reliant on exports as the rest of the world. That’s prompted Asian governments to unveil fiscal stimulus packages worth almost US$700 billion to boost local consumer and business spending.
South Korea’s LG Electronics Inc, the world’s third-largest maker of mobile phones, says industry shipments will fall more than previously expected this year. Hyundai Heavy Industries Co, the world’s largest shipbuilder, said last week that orders dropped 54 percent in January from a year earlier.
South Korean Finance Minister Yoon Jeung-hyun last month forecast the economy would shrink 2 percent this year, the first annual contraction since 1998. Citigroup Inc said yesterday the economy was likely to contract 4.8 percent.
South Korean President Lee Myung-bak’s administration has pledged 51 trillion won (US$32 billion) in tax cuts and stimulus spending and the central bank slashed the key interest rate to a record low of 2 percent last month. The government said it plans to allocate an extra budget package to support the economy.
Sales of consumer goods fell 1.9 percent in January from December and dropped 3.1 percent from a year earlier, yesterday’s report showed. Construction orders slumped 15 percent from a year earlier and investment in factories decreased 25.3 percent. Inventories rose 0.4 percent from a year ago.
A leading index of economic indicators, which provides a gauge of future business activity, fell 4.5 percent in January from a year earlier.
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