Industrial production continued to fall in most areas of the economy other than semiconductors, shipbuilding and cigarettes in September, but overall the decline halted. In fact, industrial production was up 0.3 percent in September from the same month last year and surged 10.9 percent from the month before. The turnaround was due to the end of a crippling series of strikes in the automobile industry and an increase in production of semiconductors. Output from the heavy and chemical industry sector registered a 3.5 percent increase while light industry recorded an 11 percent increase in production. In the heavy and chemical sector, most items other than other transportation equipment (up 30.7 percent) and audio-video and communications equipment (up 48.5 percent) posted declines. Such declines were most conspicuous for other machinery and equipment (down 25.4 percent) and other electrical machinery (down 25.4 percent). However, the sector's overall decline was curbed, with production rising 3.5 percent compared to the same month last year. In the meantime, most areas within the light industry sector other than cigarette production (up 28.9 percent) registered declines. In particular, wood and related products (down 24.3 percent) and leather, shoes and bags (down 21.7 percent) posted drastic declines. All told, the entire light industry sector recorded a 11 percent decrease in production from a year earlier.
Decline in Forwarding Slows in September The decline in forwarding of manufacturers' goods slowed in September, registering only a 2.9 percent decline from a year earlier, thanks to a rise in forwarding for export purposes and an easing in the decline in forwarding for the domestic market. On a month-to-month basis, forwarding increased 11 percent in September compared to August. Inventories Continue to Decline Amid Rise in Forwarding Inventories of manufacturers' goods as of the end of September dwindled 10.2 percent from the same period last year. The contraction was due mainly to further decreases in reserves of steel, non-metal mining, and chemical products, despite increases in production by those industries. Inventories were down 4.7 percent on August's levels, mainly in the areas of semiconductors, metal, and chemical goods. By item, other electrical machinery (up 13.3 percent) and metal goods (up eight percent) registered increases while automobiles and trailers (down 22.5 percent), other machinery and equipment (down 20.7 percent) and other transportation equipment (down 34.8 percent) experienced declines in inventories. The overall industry inventory ratio, which had previously been at a relatively high level, fell significantly as a result of September's hike in forwarding. Average Operational Rate Hits Highest Level of '98 The average operational rate in Korean industry hit 70 percent in September, the highest level attained in 1998. September's rate represented an 11.2 percent increase on August's levels, occasioned by a return to work at a number of auto plants after a spate of severe labor unrest. Year-to-year, the operational rate was down 10 percent, an improvement on August's contraction of 22.2 percent. A contributing factor to the relatively better figures was that Chusok, the three-day Korean Thanksgiving holiday, fell in September in 1997 whereas in 1998 it fell in October. By item, other transportation equipment (up 2.2 percent) and leather and footwear (up 21.3 percent) posted increased levels of capacity usage while automobiles (down 14.8 percent), assembly metal (down 20.7 percent) and machinery equipment (down 12.4 percent) recorded declines. On a month-to-month basis, operational rates in other transportation equipment (down 21.7 percent) and oil refining (down 10.7 percent) fell, while automobiles (up 84.3 percent), machinery equipment (up 14.3 percent) and other machinery equipment (up 28.6 percent) posted marked increases. Overall growth in capacity utilization amounted to 11.2 percent.
Private Sector Demand Slows Capital Goods Order Decline in September Orders received from the public sector by the nation's 186 manufacturers of capital goods plummeted 51.2 percent in September on a 12-month comparison. The steady decrease in private sector orders, on the other hand, slowed to only 5.2 percent, the result of a rise in orders from shipbuilders and other manufacturers. In total, overall order issuance amounted to 1.582 trillion won representing a decline of 14.7 percent from a month earlier and a significant slowing of the downward trend which has marked the course of order issuance this year. In the meantime, the forwarding of capital equipment for the domestic market decreased 36.9 percent from the same month last year and imports also decreased, falling by 52.5 percent on a year-to-year basis. Construction Orders Down 50.3 Pct on September '97 Orders received by the nation's 250 leading construction companies amounted to 2.459 trillion won in September, down 50.3 percent from a year earlier. Order issuance was depressed by lackluster demand for housing, offices, factories and warehouses in the private sector, and for water facilities, road and bridges and railroad construction in the public area. From the public sector, orders for tap water and water discharge facilities (down 74.7 percent), road and bridges (down 16.9 percent), agriculture, forestry and fisheries projects (down 83.1 percent) were off markedly. Overall, public sector orders were off 14.2 percent from a year earlier. Orders from the private sector nose-dived, falling in total by 75.3 percent on a year-to-year basis, as a result of massive falloffs in demand for housing (down 71.8 percent), factories and stores (down 97.2 percent) and offices (down 90.3 percent). Wholesale and Retail Sales Down 11.9 Pct On a 12-month comparison, wholesale and retail sales decreased 11.9 percent in September following the 16.7 percent drop registered in August. The wholesale sector recorded a drop of 6.2 percent, due to a falloff in sales of home appliances (down 20.7) and metal mining goods and metal products (down 12.4 percent). However, other food and beverages and fisheries' products posted gains of 8.7 and 13 percent, respectively. Retail sales recorded a 15.2 percent decline, year-to-year. Despite increases in general merchandise (up 18.5 percent), cosmetics (up 5.8 percent), and medical goods (up 7.9 percent), department store products (down 26.5 percent), general food and beverages (down 25 percent) and home appliances (down 21.7 percent) were off sharply. Automobile sales and related retail fuels were down 25.1 percent against a contraction of 44.2 percent in August. Sales of automobiles and related parts decreased 47 and 6.5 percent, respectively. Forwarding of consumer goods for the domestic market declined 17.5 percent in September. In the durable goods sector, down overall by 26.2 percent, major declines were registered in the forwarding of automobiles (down 64.4 percent) and washing machines (down 29.7 percent), while significant increases were marked in mobile telephone sets (up 107.2 percent), gas boilers (up 78.3 percent) and compact cars (up 32.6 percent). Forwarding of non-durable goods declined by 13.1 percent. Significant declines occurred in ready-made clothes (down 46.9 percent) and medical goods (down 11.6 percent), while cigarettes (up 10.8 percent) and kerosene (up 9.1 percent) surged. Imports of consumer goods de-creased 44.2 percent in September on a 12-month comparison as consumer sentiment remained negative in the face of the ongoing recession and growing unemployment.
Exports in October Decline 12.8 Pct from a Year Earlier October's exports were down 12.8 percent on a year-to-year basis to $10.87 billion, as demand remained depressed throughout Asia and export prices continued to be eroded. October's falloff compares with a 3.9 percent decline during the month earlier. The sharper decline was due to a loss in two days of customs clearance occasioned by the Chusok holiday. In September, exports of light industry products decreased 1.6 percent to $2.52 billion. Shipments of tires and tubes (up 2.1 percent) and textiles goods (up one percent) remained steady while those of shoes declined by 10 percent. The overseas sales of heavy and chemical products dropped 2.2 percent to $7.63 billion on a year-to-year basis. Shipments of automobiles, vessels and precision machinery posted 28.9, 11.4 and 68.4 percent increases while those of electronics products, machinery and chemical engineering products posted declines of 6.1, 17.7 and 9.7 percent. September exports rose in total to $10.9 billion, down 3.9 percent from the same month last year.
October Imports Decline 39 Pct Year-to-Year Imports continued their decline in October falling 39 percent from a year earlier to $7.69 billion. By sector, September's imports of food and beverage products and consumer goods declined 44.2 percent to $740 million over the same period, a reflection of contracted domestic demand and a fall in grain prices on international markets. Imports of crude oil (down 48.1 percent), steel goods (down 56.4 percent), and chemical products (down 25.3 percent) underwent major declines. Overall imports of resources and material amounted to only $3.79 billion, down 37.5 percent from the same month last year. Impacted by weakening facility investment, imports of capital goods declined 34.5 percent from October 1997 to $2.72 billion.
Shipments of electronics goods decre-ased to $32.36 million in September, down 9.5 percent from the same month last year due to plummeting overseas demand and ever-stricter credit conditions. Exports of industrial electronics products shrank to $734 million, a 18.5 percent decrease year-on-year. Despite the rise in shipments of wireless communications equipment by 9.4 percent, the overseas sales of computers and wired communications equipment declined 29.3 and 5.7 percent, respectively. Exports of electronics components slid to $2,065 million, down 4.6 percent from a year earlier. Overseas sales of most goods from this sector such as semiconductors and functional parts declined. Shipments of electrical home appliances also dropped, falling by 14.6 percent to $437 million, due mainly to weak sales of video equipment (down 26 percent) and audio equipment (down 19.1 percent). In particular, shipments to industrialized Western markets remained extremely sluggish.
(US$ million , % change from previous month)
Maintaining its operational rate at 60 percent, the automobile sector produced 203,000 units in September, its largest monthly output this year. Production was buoyed by a return to labor peace at Hyundai Motor, and a slow but perceptible recovery in domestic and overseas demand. The downward trend in production continued, however, as output was down 10.3 percent on August. Domestic demand continued to erode, dropping 43.2 percent from a year earlier to 77,000 units, despite a return to work at Hyundai plants and the government's drive to stimulate consumption. Overall sales of passenger cars remained depressed at 55,000 units, down 50.5 percent on a year-to-year basis. Meanwhile sales of sub-compact, compact, and multi-purpose, cars experienced a steady increase. Sales of commercial vehicles amounted to only 23,000 units, down 12 percent from the same month last year. Demand for one-ton buses and trucks in this category was brisk, however, despite a rash of bankruptcies among small-scaled businesses and worsening unemployment. Automobile exports surged by 40.1 percent year-to-year to 123,000 units, boosted by increased car sales following the resumption of labor peace in the auto industry and booming shipments of compact cars. Demand for this category was particularly strong in the European Union where overall Korean auto sales rose 109.1 percent. Exports to North America increased 29.6 percent from a year earlier, thanks to the expansion of Kia Motors' sales network. However, exports to East Europe, Asia and Latin America decreased 7.6, 51.4 and 6.6 percent, respectively, as the regions in question succumbed to recession.
(Cars, % change from previous month)
Textile exports in September reached $1,482 million due to brisk sales of manufactured textile goods and despite relatively low shipments of fabric goods, textile yarn and textile material. Exports of textile material fell to $63 million, down 16.3 percent from the corresponding month last year, edged mainly by sluggish sales of synthetic textiles. Overseas sales of textile yarns also slumped, falling 11.3 percent on a year-to-year basis to $117 million, due to torpid sales of major items such as chemical textile F yarn. Shipments of fabric goods dropped 7.9 percent to $762 million amid waning demand in the recession-hit major export markets of Hong Kong, Indonesia and Japan. However, exports of manufactured textile goods surged 20.7 percent to $540 million, thanks to a hike in sales in the United States, Japan, Taiwan and Hong Kong and improved export price competitiveness. By region, shipments, comprising mainly clothing, to the United States and the European Union increased 30.7 and 17.9 percent from a year earlier, respectively. However, exports to China and Hong Kong, major markets for Korean fabric goods, textile yarns and textile material, declined 8.5 and 16.4 percent, respectively. Aggregate exports in September surged 18.8 percent in volume, but fell 15.8 percent in price as a result of competitive price-slashing, thereby eroding industry profitability in export markets across the board.
Orders for machinery goods decreased 14.7 percent in September on a year-to-year basis. However, the declining trend apparent for three consecutive months from July, continued to slow thanks to a recovery in orders from the private sector. Orders from the public sector shrank 51.2 percent compared to a year earlier, but September's figures represented a sharp rise on a month-by-month basis, boosted as they were by booming demand from the shipbuilding and other manufacturing industries. Shipments of general machinery declined to $563 million, down 12.5 percent from the corresponding month last year, as demand in Southeast Asia and China continued to erode, and despite relatively brisk sales in the European Union and the United States. Exports of freezers and air conditioning units surged 73.2 and 25 percent, from a year earlier, respectively, while those of lifting machines and textile machinery waned. Imports in this category amounted to only $561 million, a 56.8 percent decrease on September 1997. Imports of most categories such as construction and mining machinery (down 67.3 percent), and metal manufacturing machinery (down 71.2 percent) recorded declines, with the exception of freezers and air conditioning machinery.
(US$ million, % change from previous month)
Production of crude steel fell to 3,169,000 M/T in September, down 11.3 percent on the corresponding month last year. Output from the revolving furnace sector was down nine percent to 1,849,000 M/T, as a result of drastic cutbacks in production by Pohang Iron & Steel Co. (POSCO). The electrical furnace sector also recorded a decrease in production, falling 14.1 percent amid the continuing tumble in domestic demand. Domestic consumption, in fact, sank by 30 percent in September as the recession continued to take its toll on client industries. Compared to a month earlier, though, production was up for the first time this year. Output surged as various construction projects, which had been delayed due to flooding and slow recovery in the automobile and electric home appliances industries, were resumed. By item, production of construction materials such as reinforcing steel, H-section steel, steel pipes, and hot-rolled steel boards registered 20 to 25 percent decreases in production on a year-to-year basis, but posted five to 10 percent increases over a month earlier. Domestic demand for thick boards rose 10 percent from a year earlier, as demand from shipbuilders rose. In the meantime, September's exports of steel material totalled $634 million in the wake of a concerted export drive, up 18.9 percent from a year earlier.
(1,000 M/T, US$ million, % change from previous month)
The petrochemical industry experienced booming business in September, despite a slight decrease in production. Business was buoyed by a rise in exports and a slowing decrease in domestic demand. Industry output declined 0.5 percent to 1,101,000 tons, after individual manufacturers agreed to lower their production to prevent export prices from falling further, despite the fact they have expanded their manufacturing capacities. In the meantime, forwarding for the domestic market showed its best performance in recent months, increasing 18.3 percent on August's totals. However, production declined 3.7 percent compared with the same month last year. The recovery in domestic consumption was partially interpreted as meaning the recession in client industries was starting to bottom out. September's exports were down on those of the previous month, due to lowered operational rates and a slight recovery in domestic demand which led to a decline in inventories available for export. Year-to-year, shipments rose 23.6 percent, but increased only 0.5 percent in value terms over the January-September period, due to the continued drop in the price for TPA and continually lower export prices.
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