SEJONG -- The nation’s economy has faced downside risks in the wake of global industrial output and trade scaling back amid the ongoing pandemic, a state-funded research agency said Tuesday, casting concerns over a recent surge in manufacturers’ inventories.

According to a report from the Korea Development Institute, the South Korean economy has been facing uncertainty with negative factors such as the spread of COVID-19 variants worldwide emerging despite a modest recovery earlier this year.

The KDI particularly has pointed to a sagging index in the manufacturing industry, which contributes greatly to the gross domestic product.

“In October, shipments of manufacturers increased only 0.4 percent on-year, while inventories sharply increased by 7.2 percent,” it said. “Negative signals are gradually looming.”

Its data showed that inventories declined for the eighth consecutive month from January to August 2021, on an on-year basis. But the volume of inventories increased in the recent two months, starting with growth of 3.4 percent in September.

In addition, the omicron variant of COVID-19 has been aggravating downside risks over the nation’s economy since late November, said the KDI.

The institute also addressed concerns over the export sector, saying, “Though the outbound shipments posted high growth on the basis of collective price, the growth based on goods volume has been in a slowdown phase.”

It analyzed that the noteworthy increase in export performance in November is mainly attributed to the overall climb in goods prices, adding that the omicron variant could hamper international logistics for supply.

Private consumption, which has recorded a rebound to a certain extent, will possibly undergo restriction in recovery due to reenhanced quarantine measures against the virus.

The institute also pointed to a possible slowdown in the US and eurozone countries for a core unfavorable factor hindering the growth of the Korean economy.

“While the US saw the turnover of retailers increase by 16.3 percent in October (on-year) and unemployment rate stay at 4.6 percent, major indexes for private consumption are continuously sliding,” it said.

The GDP outlook on major eurozone economies has revised downward since October with consumer sentiment indexes falling, though the countries posted a recovery in industrial output and retailer sales in September, it said.

“Due to the resurgence of COVID-19 and the outbreak of the new variant, many countries are tightening preventive measures, and consumer sentiment is weakening, adding to concerns over a slowdown in economic recovery,” said the KDI.

By Kim Yon-se (kys@heraldcorp.com)