Industrial production in January declined 10.3 percent from the same month last year, due mainly to extremely weak domestic demand in almost all sectors, the notable exceptions being semiconductors and shipbuilding. Production decreased 9.8 percent from December's levels, hit by sluggish business in all areas other than office and computer-related equipment. Production in the heavy and chemical sector sank 7.7 percent while output in light industry dropped by 19.6 percent. Bright spots included the heavy and chemical industry category, where production of other transportation equipment and office, computer and accounting-related goods was up 5.3, and 15.3 percent respectively, while output from audio-video and communications equipment makers increased by 7.0 percent on a year-to-year basis. Production of assembly metal goods and other machinery and equipment, though, decreased 29.1 percent while the output from makers of watches, medical and optical goods fell 26.8 percent, and that from automobile and trailer producers declined by 19.1 percent during the same period. Overall production in the heavy and chemical sector declined 7.7 percent from a year earlier. In the light industry sector, production of bags, leather goods and shoes
contracted by 43.7 percent, while wood and related products together with clothing and fur
goods output decreased 24.6 percent. The decline in the production of furniture and other
manufacturing industry reached 23.5 percent. Due to slackening domestic demand in almost all areas, forwarding of manufacturers'goods in January decreased overall by 7.2 percent on a year earlier, despite the steady rise in forwarding for export purposes. Forwarding for exports rose 28.3 percent, the largest such increase since April, 1997. Forwarding for domestic markets, meanwhile, contracted by 20.6 percent.
Inventories as of the end of January remained at 1.2 percent following a sharp decline in production, despite a drastic drop in forwarding in areas such as automobiles, machinery, and clothing amid continuing weak domestic demand. Product areas where inventories registered sharp increases included cigarettes (up 22.1 percent) automobiles and trailers (up 19.7 percent), cokes and oil refined goods (up 12.3 percent) and other electric machinery (up 16.1 percent). Inventories in assembly metal goods (off 17.0 percent), paper goods (off
9.4 percent), textile goods (off 11.7 percent), clothes and fur goods (off 10.0 percent)
and audio-video and communications equipment (off 8.8 percent), meanwhile, marked
contractions. The average operating rate in the manufacturing sector fell by 16.2 percent in January compared to a year earlier, as production declined in almost all industrial sectors except semiconductors. In particular, automobile and machinery equipment manufacturers registered sharp declines in production. Compared with December, the operating rate was also down, in this case by 10.3 percent. By industry, machinery equipment (down 32 percent), assembly metal goods (down 34.1 percent), automobiles (down 19.8 percent) and food beverages (down 18.6 percent) registered contractions in their utilization of capacity. The outstanding exception to the trend was the semiconductor industry where the operating rate marked a 13.1 percent increase. Total production capacity marked a slight increase of 1.1 percent over
December, but contracted even more slightly on a year-to-year basis by 0.4 percent, due
mainly to drastic slashes in facility investment. Orders received by the nation's major 250 construction companies from the
private sector for projects such as offices, factories and warehouses decreased
drastically in January, while those from the public sector slightly dropped compared with
the same month last year. Cumulative orders dwindled by 19.3 percent on a year-to-year
basis to 2.1 trillion won. The total value of contracts received by the country's 186 major machinery
makers at 1.12 trillion won in January represented a decrease of 31.1 percent from the
same month a year earlier. The falloff was due largely to a decrease in order issuance
from the public and manufacturing sectors, particularly in this regard from automobile and
assembly machinery manufacturers. The economic crisis continued to impact on domestic consumption, which remained extremely sluggish in both the retail and wholesale sectors, registering a 8.7 percent fall in January and continuing the downward trend marked by the 4.9 percent drop in December. This represents the sharpest fall since April, 1982 when consumption decreased 11.7 percent. In the wholesale area, consumption dropped 4.4 percent in January compared to a year earlier. Consumption of office and computer-related goods (up 21.6 percent), medical goods (up 15.1 percent) and clothing (up 8.3 percent) rose while those of chemical products (off 20.3 percent) and fishery products (off 21.6 percent) fell. Consumption in the retail sector registered an 8.8 percent falloff, a reflection of torpid demand for food and other groceries (off 15.8 percent), home appliances (off 14 percent) and department store sales (off 11.5 percent), despite relatively booming sales of sports goods and toys (up 9.7 percent), and other general retail sales items (up 9.2 percent). In the meantime, vehicle fuel sales were down 27.7, impacted by the drastic decline in sales of automobiles (off 54.8 percent). Forwarding of consumer products for the domestic market decreased 18.6
percent in January from a year earlier, due to plummeting demand for consumer durables
such as passenger cars (off 67.9 percent) and large-size refrigerators (off 33.7 percent).
Demand for durables dwindled by 23.2 percent in total. Sales of consumable products like
gasoline (off 27.7 percent) and ready-made clothing (off 25.9 percent) declined 17 percent
over the same period. Imports of consumer goods in January contracted 47.5 percent from
the same month last year in the face of dampened consumer sentiments following a string of
major corporate bankruptcies and a rise in unemployment. Exports in February rose 21.6 percent in
January on a year-to-year basis, reaching $11.39 billion. Shipments of light industrial
goods such as textiles, tires and heavy and chemical products like semiconductors and
automobiles posted booming shipments. Exports by the entire light industry sector dipped
by three percent in January, the second consecutive month of decline. The heavy and
chemical industries meanwhile experienced an upturn in exports following a rise in
overseas sales of automobiles and chemical products, despite continued declines in steel
and electrical and electronic goods. On balance, total exports in January rose, but only
by 0.3 percent to reach $9.06 billion. Imports in February amounted to $8.1 billion in February, a decrease of 29.5 percent from the corresponding period last year, as purchases of raw material, capital and consumer goods dropped drastically as a result of the ongoing economic slowdown. In addition, the import of raw material essential to exports also decreased 29.5 percent to $8.1 billion as Korean banks, wary of the financial situation, refused to open letters of credit for importers. In the meantime, the devaluation of the won against the U.S. dollar hit
hard imports of consumer goods such as beef, cigarettes and durable goods including
television sets and automobiles, their levels dwindling in January to half what they were
in the same month a year ago. Capital goods imports posted a 41.8 percent decline, while
those of raw material declined 36.1 percent. In particular, imports of key materials for
light industry such as hides, wood and fabric material, marked a sharp decrease. Imports
cumulatively decreased in January by $7.55 billion, down 39.6 percent from a year earlier. The exports of electronics products amounted to $2,882 million in January, a decrease of 7.7 percent from a year earlier, reflecting continuing low sales of home appliances, industrial electronics products and related components in the weakened currency markets of Southeast Asia. Shipments of electronic home appliances, in particular, registered a drastic decline of 33.3 percent to $394 million, edged by lackluster sales of color television sets, VCRs and audio-video goods. Industrial electronic goods exports also declined; they fell 2.3 percent to $680 million as a result mainly of torpid sales of computers and peripheral products. The overseas sales of electrical components, boosted by semiconductors like the 64M-DRAM and other non-memory chips, reached $1,808 million, a 1.5 percent increase on January 1997. Exports of semiconductors rose 2.2 percent to $1,296 million in the same period. Domestic computer makers have begun to focus their efforts on boosting
sales of low-priced products to cope with the national retrenchment engendered in response
to impact of the International Monetary Fund's (IMF's) financial assistance program.
Samsung Electronics is developing marketing tactics to this end, and Trigem Computer has
launched a program under which clients swap their old models for new ones. Other computer
makers like LG, IBM and Daewoo have also marked down their computers by 10 to 15 percent. Automobiles Automobile production recorded a 11.9 percent decline to 123,000 units in
January, as manufacturers slashed production to match falling domestic demand. Domestic
consumption of cars was down 41.7 percent from the same month last year at 45,000 units,
consumer sentiment remaining frozen in the face of anxiety over possible unemployment and
a rise in transportation taxes. Textiles Regarding exports of textile material, the value of overseas sales of polyester staple fiber in January shrank 7.4 percent compared to a year earlier. The contraction was due to weakening export prices which impacted adversely on profits from overseas markets. Exports of textile yarns, however, increased 19.1 percent to $168 million, as domestic original yarn makers moved to expand exports. Shipments to the United States and European Union continued to increase,
boosted in the main by booming sales of chemical F yarns and fabric goods. Shipments to
developing nations particularly in Southeast Asia dwindled as the Korean won, Total textile imports decreased 33.9 percent to $285 million as a result
of the general lackluster domestic demand for textile products and the devaluation of the
won on currency markets which has served to boost the price of foreign-made goods. Nine ships were completed in January amounting to 403,000 G/T, a 37.6
percent increase over the same month last year while shipbuilding for the whole of 1997
rose 4.5 percent on 1996's totals to 7,449,000 G/T. The backlog of unfilled orders climbed
to 17,821,000 G/T for 296 ships in January, up 36.7 percent from a year earlier, of which
55.1 percent or 9,811,000 G/T were for tankers. Imports of similar goods, affected by the contraction in facility investment, reached only $624 million, down 54.9 percent from the corresponding period last year. Product categories in which imports recorded drops of more than 50 percent included textiles, forklifts, and manufacturing and chemical machinery. The trade deficit in general machinery thus narrowed to $158 million, down 82.9 percent from the year-earlier period. Domestic machinery makers are moving to explore overseas markets in
response to conditions of extremely poor domestic consumption. Industry observers foresee
the nation being able to achieve a 15.2 percent increase in exports in 1998 to $1.14
billion, as the price competitiveness for major items like excavators and wheel loaders
has increased on account of the continuing low value of the won on currency markets.
Construction machinery manufacturers this year plan to expand production above the 2.5
trillion won level, a five percent increase over last year. Petrochemical
Industry In particular, the production of synthetic resin and rubber decreased drastically by 26.1 and 23.0 percent, respectively, on a year-to-year basis. In a drive to clear excessive inventories and raise ready cash, manufacturers have focused their energies on overseas sales, achieving a 43.2 percent growth in exports compared to January 1997. However, despite their recent success in exports, the fall in product prices on international markets is expected to take its toll on manufacturers'profitability.
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Exports of Electrical and Electronics Goods Decline
Auto Makers Focus on Exports to Cope With Low Domestic Demand
Steel Production Declines 
Textile Exports Increase, Boosted by Price Competitiveness
Contracts Evade Shipbuilders Due to Financial Crunch
Imports Slump on Account of Lower Facility Investment
Low Demand and Production Continue in Petrochemical Ind.
