Experts remain cautious due to oil prices, external uncertainties


Korea’s industrial output grew faster than expected in January on strong overseas demand, with semiconductor and auto makers leading the way, official figures showed Thursday.

But the government remained cautious about future economic trends, citing higher oil prices and other external factors that might serve as a drag on recovery here.

Mining and industrial production rose 13.7 percent year-on-year, faster than a revised 10.6 percent increase in December, Statistics Korea said.

Output increased 4.6 percent from the preceding month following a revised 3.1 percent monthly increase in December. The January rise was the largest since the same figure in September 2009.

Economists had forecast output would grow 1-1.4 percent month-on-month and around 12.5 percent year-on-year.

The 12-month average leading index ― a key gauge in predicting the economy’s future performance ― increased 3.0 percent year-on-year in January, faster than a revised 2.8 percent year-on-year rise in December.

Local manufacturing plants operated at 84.8 percent capacity in January, up 2.7 percentage points from a month earlier. The ratio was the highest since the statistics agency started to compile related numbers in 1980.

“Strong recovery of domestic demand and exports were reflected in the January output figures,” said Yoon Jong-won, head of the finance ministry’s economic policy bureau.

“However, the increase is partly attributable to a jump in output ahead of the Lunar New Year holiday. We still have to wait and see how factors such as soaring oil prices and the foot-and-mouth disease outbreak could affect those indicators for February,” he added.

Figures released Thursday showed inflation hit a 27-month high of 4.5 percent in February, due partly to rising crude oil prices caused by unrest in the Middle East, and to rises in local food costs following a foot-and-mouth outbreak.

Stocks and the won rose after the report, which bolstered economists’ expectations that the Bank of Korea will raise the key interest rate next week from 2.75 percent. At the same time, central bank officials will need to consider whether surging oil prices may threaten growth by undermining the global economy and demand for exports.

“Strong output data suggests the economy is sustaining stable growth,” said June Park, an economist at Woori Investment & Securities Co. in Seoul. “Inflation pressures are mounting such that the central bank should raise interest rates soon.”

Korea’s economy expanded 0.5 percent in the three months through December from the previous quarter, when it grew 0.7 percent. For the whole of 2010, gross domestic product increased 6.1 percent, the fastest pace since 2002. The Bank of Korea forecasts 4.5 percent economic expansion in 2011.

(From news reports)