The South Korean economy is facing a slowdown in the manufacturing sector and the overall economy stemming from protracted sluggish exports, but a steady upbeat trend of domestic consumption buffers a further slump, a state-run think tank said Tuesday.
"The recent fall in several production indicators implies a minor slowdown in overall economic activities," the Korea Development Institute said in its monthly evaluation of the country's economic conditions.
"Mining and manufacturing production and shipments waned further due to reduced workdays amid the continued decline in exports, indicating a contraction in overall production activities."
In April, South Korea's industrial output fell 2.8 percent from a year earlier, down from a 0.6 percent on-year fall in March, largely because of the one fewer workday than a year ago.
At the same time, the manufacturing capacity utilization rate fell to 71 percent in April from March's 73.7 percent as the overall industry has been in a persistent slump over recent months.
Exports fell 6 percent on-year in May, the slowest pace since November last year, while the country's outbound shipments marked negative growth for 17 straight months since the first month of 2015.
"Despite the reduced drop in exports, a fast recovery is unlikely due to the global economic slowdown and external uncertainties," the KDI report said.
However, the think tank noted that recent data showed that domestic demand has stayed favorable enough to cushion the entire economy from the fallout of the sluggish production side.
"Domestic demand indicators continued a recent trend, offsetting the slowdown in the Korean economy," it said. "Private consumption showed relatively weak performance in services, but maintained modest growth in durable goods."
The retail sales index gained 4.2 percent from a year ago in April, slightly down from a 5.7 percent on-year growth tallied in March.
Sales of durable goods, including passenger cars, jumped 8.9 percent on-year on the back of the government's tax cut program, while those of non-durables rose 3.7 percent.
But services production slowed to 2.1 percent in April from the previous month's 2.6 percent, restraining a further improvement of entire domestic demand, added the KDI. (Yonhap)
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