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South Korea factory output falls at fastest pace since May 2020 on auto chip shortage

South Korea factory output falls at fastest pace since May 2020 on auto chip shortage

FILE PHOTO: Employees work at a bio plant factory of Hanmi Pharm in Pyeongtaek, South Korea, July 1, 2021. REUTERS/Heo Ran

SEOUL : South Korea's factory output in October shrank at its sharpest pace in nearly 1-1/2 years, government data showed on Tuesday, as global chip shortages continued to weigh on car production.

Industrial output last month unexpectedly fell by a seasonally adjusted 3.0per cent month-on-month, Statistics Korea data showed, following a 1.1per cent decline in September and logging the biggest decline since May 2020.

That also missed the 0.4per cent growth tipped in a Reuters poll of analysts, by a large margin.

"Continued global supply chain disruption is one main factor behind the sluggish data," Finance Minister Hong Nam-ki said, referring to the auto chip shortage.

A breakdown of data showed production of cars shrank 5.1per cent, while that of primary metal fell 5.9per cent.

"We expect better data in November, reflecting strong exports and a recovery in domestic demand and as the impact from high base fades," Hong said.

On an annual basis, output grew 4.5per cent, sharply rebounding from a 1.8per cent contraction in September and beating 3.0per cent growth forecast in the poll.

Car production contracted 13.5per cent year-on-year, but that was offset by 38.7per cent growth in semiconductors output.

The global spread of Omicron coronavirus variant may further risk production going forward, with many countries closing their borders to prevent fresh outbreaks.

Meanwhile, Tuesday's data also showed service sector output last month shrank 0.3per cent month-on-month, while retail sales grew 0.2per cent.

(Reporting by Joori Roh; Editing by Nick Zieminski and Sam Holmes)

Source: Reuters

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