Wednesday, August 29, 2007

Industrial Output Rises Rapidly

From Bloomberg today:

South Korean Factory Output Jumps on Chips, Phones

South Korea's industrial production rose seven times faster than expected in July as companies increased output of semiconductors and mobile phones.

Manufacturing grew 2.1 percent from June, when it gained 1.9 percent, the statistics office said today in Gwacheon, South Korea. The median forecast in a Bloomberg News survey of 11 economists was for a 0.3 percent increase.

An increase in output may help to protect Asia's third- largest economy from a slowdown in consumer spending after the benchmark stock index fell from a record and the central bank raised interest rates twice in two months. Overseas shipments, which account for about 40 percent of the $887 billion economy, rose at the fastest pace in six months in July.

``Upbeat export momentum will keep the economy chugging along,'' said Kim Jae Eun, an economist at SK Securities Co. in Seoul. ``The economic recovery will remain unscathed for the moment.''

The won closed at 942 per dollar at 3 p.m. in Seoul, down 0.2 percent. The yield on three-year government bonds fell 2 basis points at 5.34 percent.

From a year earlier, industrial output climbed 14.3 percent in July, the fastest pace in 10 months, up from a 7.7 percent increase in June.

Production last year was depressed by strikes at Hyundai Motor Co. and its affiliate Kia Motors Corp. Auto shipments fell almost a third in July 2006. Car production jumped 38.1 percent in July from a year ago. From June, auto production declined 8.4 percent in July, today's report showed.

Semiconductors, Mobile Phones

Production of semiconductors rose 4.9 percent from June and mobile-phone output climbed 9.5 percent, both on rising demand from overseas buyers, today's report showed.

Semiconductors and mobile phone are ``two important sectors in assessing the impact of any U.S. slowdown on Asia,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong. Mobile-phone demand shows an ``ongoing strength in consumer spending'' as the appetite for new model handsets tend to be discretionary.

Sales of consumer goods rose 1.6 percent from June. Corporate investment on facilities climbed 1.3 percent from a year ago.

Factory output may slow in coming months if South Koreans spend less after the central bank raised interest rates twice this year and local stock prices declined.

The benchmark Kospi stock index has dropped 8.9 percent since setting a record on July 25 on concern a U.S. housing recession would spread and slow global growth.

``The clear risk to what is a very optimistic outlook on South Korea at present is the increased likelihood of a more substantial slowing in U.S. economic activity,'' Maguire said.

The Bank of Korea lifted borrowing costs for a second time in two months on Aug. 9, bringing the benchmark rate to a six- year high.

Construction orders dropped 14.9 percent in July from a year ago, as there were fewer orders to build homes.

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