South Korea’s April industrial output sank for the second consecutive month in a row, widening its downward pace in April on subdued manufacturing activities, especially, slump in the production of auto and electronic parts, government data showed.
Industrial production fell a seasonally adjusted 1.3 percent m/m in April, the same rate of decline as in the previous month. The index of all industry production dropped 0.8 percent from March, when it climbed by 0.7 percent. On a y/y basis, industrial production fell 2.8 percent in April, worse than the 2.8 percent fall in March. The expectation was however, for a decline of 1.3 percent.
Sluggish car production led the decline, sinking 8.7 percent on-year, while the output of electronics parts, including displays, plunged 12.7 percent. Exports, which are reported in the y/y terms, are expected to show an improvement to -1.4 percent in May from -11.2 percent in April, data released by the Statistics Korea showed Tuesday.
However, production in the semiconductor and petroleum industries jumped 15.1 percent and 9.1 percent, respectively, to offset the sharp decline. The index of financial & insurance activities and human health & social work activities also rose while construction and manufacturing declined from the previous month.
Meanwhile, the Korean government plans to promote corporate restructuring and reduce overcapacity in certain sectors like shipbuilding, steel and petrochemicals.
“If corporate restructuring is pushed forward smoothly, it will imply a faster pace of inventory destocking and more downside pressures on the short-term growth numbers going forward,” DBS said in a research piece.
The rebound in international oil prices and the depreciation of the Korean won may have boosted the costs for upstream producers, but the downstream pricing power is expected to remain weak, due to lackluster domestic demand amid softer labor market, DBS research unit said.