South Korea's industrial output grew in June, but its pace sharply decelerated in the face of headwinds from the eurozone debt crisis and concerns over global slowdowns, a government report showed Tuesday.

According to the report by Statistics Korea, production in the mining, manufacturing, gas and electricity industries expanded 1.6 percent last month from a year earlier, sharply slowing from the

2.9 percent on-year gain tallied in the previous month.

The output also contracted 0.4 percent last month compared with a month earlier, the first on-month shrinkage in three months.

The country's service sector production, meanwhile, advanced

1.2 percent in June from a year earlier, but it edged down 0.4 percent compared with the previous month, the report showed.

"The on-month output decline is attributable to a fall in the manufacturing sector," the report said. "Manufacturers were affected mostly by sluggish production of transportation equipment and machinery despite an increase in semiconductors, parts and cigarettes."

The data comes as South Korea's economy, heavily dependent on trade, has been faced with shrinking demand for its goods. The government predicted the country's exports will grow 3.5 percent this year, far lower than a 19-percent advance registered a year earlier.

Last month, the government revised down its 2012 growth forecast from 3.7 percent to 3.3 percent, citing such toughened external market situations.

Concerns seem to be further deepening after the central bank earlier announced that the country's economy grew 0.4 percent on-quarter in the April-June period, slowing from a 0.9 percent gain in the first quarter.

This is the slowest growth since a 0.3 percent expansion in the fourth quarter of last year. The economy grew 2.4 percent from a year earlier.

Finance Minister Bahk Jae-wan told a meeting last week that the government will do its best to achieve a 3-percent range growth for this year, saying that the overall growth trend of Asia's fourth-largest economy is being delayed.

The report showed that the manufacturing sector, which accounts for a large portion of the country's exports, appears to be affected by less demand amid the slowing economic growth.

The average factory utilization rate in the sector fell 1.2 percentage points to 78.2 percent, the lowest level in three months, according to the report.

Consumption and corporate investment also shrank last month, indicating that domestic demand, a key element of the country's economic growth, is limping along.

The report also showed that the country's retail sales index fell 0.5 percent in June from a month earlier, the first contraction in three months, though it edged up 0.6 percent from a year ago.

Corporate investment dropped, indicating that business circles are holding back spending for fear of worsening market conditions at home and abroad.

Facility investment shrank 6.3 percent last month from a month earlier. It also dropped 5.6 percent from the same period a year earlier, according to the report. (Yonhap News)