Production, investment, consumption grow in Aug.

Improvement not seen as sign of sustainable recovery

The economy has shown signs of a mild recovery as indices for the nation’s production, consumption and investment all improved in August.

Experts, however, said that this monthly data should not be taken as signs of a sustainable rebound as the economy is facing both local and international unfavorable factors.

They said that since the August pickup was supported by special demand ahead of the Chuseok holidays the economy is not likely to see a meaningful recovery in the coming months, citing sluggish exports.

According to Statistics Korea, production, consumption and investment rose 0.5 percent, 2.9 percent and 1.9 percent, respectively, in August from the previous month.

Production in the mining and manufacturing industries dropped 1.4 percent month-onmonth in August mainly due to a decline in automobile production, but overall it sustained a 0.5 percent rise in the period on the back of a rise in the services sector.

The output of the services sector climbed 1.2 percent thanks to a 2.6 percent jump in the retail and wholesale industries.

However, automobile production fell 4.6 percent month-on-month.

The data also displayed the nation’s production managed to withstand shocks from Tokyo’s export restrictions on materials critical for manufacturing semiconductors and screens. Rather, chip production was up 0.3 percent in July and 0.2 percent in August monthon-month.

Consumption climbed 3.9 percent, the largest jump since January 2011 when the figure was up 5 percent.

“The rise in demand ahead of the Chuseok holidays led the boost in the retail and wholesale industries,” said a Statistics Korea official. Chuseok is Korea’s major harvest festival holiday.

The data suggested facility investment rose 1.9 percent in August, the third straight monthly gain. Construction investment also climbed 0.3 percent.

Despite the advance in various business indices, experts remained skeptical over the future course of the economy.

“Korea’s economy is facing more unfavorable factors than favorable factors. I don’t think it has reached a trough. It is likely to decline further by the end of the year,” said Yonsei University economist Sung Tae-yoon.

“The Bank of Korea should take a quantitative measure in October. It should lower its key rate.” Statistics Korea officials agreed. “The economy improves when exports are solid. There are still a number of external factors that could potentially undermine the country’s economy in the future. We don’t think the economy is recovering,” said one official.

The total value of orders received by construction companies for overseas projects also declined 4.2 percent month-on-month in August.

But the statistics agency’s coincident indicator gain 0.2 points, the first rebound in three months.

However, reflecting experts’ pessimistic views, its leading economic index, which forecast future economic conditions, fell 0.1 point.

The benchmark KOSPI, considered as a leading indicator of the economy, fell around 2.3 percent in August.

“Winter is coming,” said Daishin Securities researcher Lee Kyungmin.

“The KOSPI has started declining once again. There are no positive signals from the business sector. It is hard to find any driving force to lead the stock market at this point, whereas external risks are growing.”