The Korean economy is likely to recover slower than expected, despite slight improvements in demand and exports, the state-run Korea Development Institute said on Sunday.

The KDI report said that industrial production continued to show weak performance between January and February this year, with February’s data showing a 0.8 percent decline from in January.

Facility investment declined as well, indicating that manufacturers are striving to cut costs to further offset their first quarter slowdown.

In February, the average operating capacity of factories went down 0.9 percentage points to 77.8 percent from January.

Employment slowed down in February, as employers hired less temporary or non-regular workers during the holiday season.

However, there had been some factors that showed slow but steady signs of recovery.

Service production improved in the same period, up 1.7 percent since January, the KDI reported.

Exports have swung into the positive, leading to a trade balance surplus.

Private consumption and construction investment improved, boosting consumer sentiment.

The institute reported a slow growth in exports and imports last month in part due to weak performances in automobile and shipbuilding, two of the country’s main export items.

The state researcher said that the U.S. and China have been gradually recovering, despite the eurozone’s prolonged debt crisis.

By Chung Joo-won (joowonc@heraldcorp.com)