S Korea's consumption, investment both fall

South Korea's industrial output rebounded in March after two straight months of decline, but consumption and facility investment lost ground in the latest sign that economic recovery momentum remains fragile, data showed yesterday.

Industrial production increased 1.5 per cent in March from the previous month, compared with a 0.3 per cent on-month drop in February, according to the data from Statistics Korea.

Compared with a year earlier, industrial output rose 3.1 per cent.

Retail sales, a gauge of private spending, declined in March amid the fast spread of the omicron variant. Retail sales fell 0.5 per cent on-month, after remaining flat in February.

Facility investment declined for the second straight month mainly because China's COVID-19 lockdowns of its major cities dented supplies of parts for machinery and autos. Facility investment decreased 2.9 per cent in March, compared with a 5.6 per cent decline in February.

The statistics agency said industrial output turned to growth last month as service output and exports remained robust.

"But domestic demand-related data were sluggish in the indication that economic recovery momentum remains fragile," Eo Woon-sun, a senior Statistics Korea official, said.

The fall in the composite coincident index indicates that uncertainty of an economic recovery remains high."

Finance Minister Hong Nam-ki

Asia's fourth-largest economy has been on a recovery track on the back of robust exports and improving private spending. But it faces heightened economic uncertainty as soaring energy prices have put upward pressure on inflation amid Russia's war with Ukraine.

In terms of an economic outlook for April, Eo cited robust exports and the lifting of almost all COVID-19 social distancing rules as positive factors.

"But amid global supply chain disruptions, the Ukraine crisis and China's COVID-19 lockdown of its major cities could weigh on the economy. Uncertainty for growth momentum still remains high," he added.

The main index gauging the current economic situations fell for the first time in six months in March in a possible sign that economic growth momentum may have peaked.

The so-called cyclical component of the composite coincident index, which reflects current economic situations, fell 0.2 point onmonth to 102.4.

The cyclical component of the composite leading index, which predicts the turning point in business cycles, also shed 0.3 point onmonth to 99.5, extending its losing streak to the ninth month.

"The fall in the composite coincident index indicates that uncertainty of an economic recovery remains high," Finance Minister Hong Nam-ki wrote on his Facebook page.

South Korea's consumer prices are under upward pressure amid surging fuel prices and a rebound in demand from the pandemic. High inflation could erode consumption, thereby hampering economic growth.

Consumer inflation grew 4.1 per cent in March from a year earlier, accelerating from a 3.7 per cent on-year gain in February. Inflation growth exceeded 4 per cent for the first time in more than 10 years. The Bank of Korea aims to keep annual inflation at 2 per cent over the medium term.

The International Monetary Fund recently lowered its 2022 growth outlook for the South Korean economy to 2.5 per cent, while raising its inflation projection to 4 per cent.