[ Economy > Economic Update ]

 espite a decline in output of textile products and apparel, increased production of automobiles and semiconductors raised the industrial output index (2000=100) by 4.5 percent on a yearly basis in March to 115.8.
  In the manufacturing sector, production of capital goods rose 3.9 percent, led by an increase in output of personal computers and semiconductor equipment. Higher production of LCD monitors and MOS DRAM memory boosted output of intermediate goods by 7.4 percent. Consumer goods production declined 1.1 percent due to a decrease in output of nondurable consumer goods such as books and cosmetics, offsetting increases in durables such as automobiles and Flat Panel Display (FPD) TVs.

  The Information & Communications Technology (ICT) manufacturing index rose 9.4 percent in March compared to the same month of the previous year.
  In brief, output of semiconductors grew on-year by 21.8 percent, automobiles by 12.0 percent, machinery and equipment by 7.4 percent and electrical machinery by 7.3 percent. On the other hand, production of apparel sank 17.4 percent on a yearly basis, textile products by 12.2 percent and food products by 3.7 percent.
  On a seasonally adjusted monthly comparison, semiconductor production edged up 4.2 percent, automobiles by 4.2 percent and miscellaneous transportation equipment by 8.4 percent. Meanwhile, output of food products fell 5.7 percent, refined oil by 8.6 percent and machinery and equipment by 1.4 percent.

  April exports hit $1-billion record high while cars become no.1 export item
   April exports rose by 20.3 percent on a yearly basis to $15.86 billion and imports by 18.2 percent, resulting in a total trade surplus of $1.01 billion. Exports in April set an all-time high record, maintaining double-digit growth for the 10th consecutive month.
   Exports of wireless communication devices and automobiles continued their steady growth. Exports of semiconductors continued to slump due to constantly decreasing D-RAM prices while shipments of computers also sank as manufacturers transferred production abroad.
  Notably, cars overtook semiconductors as the country¡¯s no. 1 export item on a cumulative basis to the end of April. Outbound automobile shipments amounted to $5.69 billion to account for 20.5 percent of total exports, compared to $5.43 billion for semiconductors.

  Marked increases in all sectors though oil bill eases
  With the stabilization of oil prices, the April import bill for oil began to level off as did that for petrochemicals, semiconductors and capital goods.
  Overall, April imports were up 18.27 percent on the year. Within the April 1st to April 20th period, imports of raw material grew 12.2 percent on the year to $4.67 billion and those of capital goods by 10.9 percent to $3.63 billion. Consumer goods imports also grew, rising 6.0 percent to $1.14 billion.

  Trade balance back in the black
   After four months of deficit, Korea¡¯s trade balance has returned to the black in April with a surplus of $1.01 billion. The trade surplus with China increased, that with the United States edged down a little, while the deficit with Japan continued to expand.

  In detail, from April 1st to April 20th, exports to the United States were down for the second month in a row as the American economy weakened. Strong growth in the Chinese economy, by contrast, spurred exports of IT and intermediate products (electronic components, steel, textiles, etc.)
  Imports from major trading partners Japan, China and the United States, were all up, rising by 19.2 percent, 19.1 percent and 0.7 percent, respectively.

  Reserves remain steady despite massive foreign bond redemption
   At end-April 2003, foreign exchange reserves stood at $123.62 billion, a $205-million decrease from end-March.
  Rather than the repayment of $1 billion of foreign bonds plus interest payments of $117 million that came due April 15th, the slight decrease in foreign reserves was due to the weakening of the U.S. dollar against the euro and Japanese yen.
  Foreign exchange reserves at end-April comprised $106.54 billion in securities, $16.43 billion in deposits, $566 million in the national reserve position with the International Monetary Fund, $14 million in Security Deposit Receipts (SDRs) and $70 million in gold.

  Production goes into high gear while negative sentiment slows domestic sales
   An increase in production-days and greater export demand prompted domestic automobile production to rise steeply in March on the month by 18.2 percent to 300,000 units and up on the year by 12.6 percent.
  While domestic sales were up 9.8 percent on the month, ongoing negative consumer sentiment resulted in a 7.2-percent fall on the year to 131,000 units. On a monthly basis, nearly all carmakers demonstrated gains in domestic sales; in this context GM Daewoo outperformed all others with a growth of 19.1 percent. However, all carmakers excluding Renault Samsung experienced a drop in domestic sales compared to April 2002.

  On account of increased demand in North America and Europe, exports rose 10.0 percent on the month to 135,000 units and grew on the year by 10.8 percent. In particular, Ssangyong¡¯s exports soared 47.4 percent on the month and Kia¡¯s by 29.6 percent. On a yearly basis, all carmakers experienced export growth except for Hyundai and Ssangyong. Exports soared in most regions, growing by 58.0 percent in Asia, 45.1 percent in West Europe, 28.9 percent in Africa and 14.7 percent in the Pacific.

  American demand falters as Chinese, Europeans Quicken Export Pace
   Led by higher-end digital-convergence products, exports of electrical/electronic home appliances grew 16.4 percent on-year and 20.9 percent on-month to $1.16 billion in March. Exports to China, Finland and Italy recorded totals of $91 million, $76 million and $45 million, representing growth of 59.3 percent, 337.0 percent, 98.9 percent on-year, respectively. Conversely, exports to the United States, the largest export market for this sector, slid 2.1 percent to $248 million. Furthermore, exports to Mexico and Hong Kong were also down, falling 8.3 percent and 16.2 percent, respectively.

  Exports of video equipment (up 25.7 percent), refrigerators (up 35.4 percent), rotary equipment (up 29.9 percent) grew steadily, while those of audio equipment were off by 17.1 percent. Specifically, exports of color TVs (up 64.6 percent), washing machines (up 70.9 percent), air conditioners (up 17.3 percent) and video cameras (up 8.2 percent) increased considerably, while those of VCRs (down 21.3 percent) and microwaves (down 15.3 percent) declined.
  Imports of electrical appliances in March increased 14.3 percent on the year to $278 million.
   Exports of electrical/electronic appliances in March accounted for 7.5 percent of the $15.4-billion export total for the month, while trade in this sector produced a surplus of $878 million.

  Order books thicken while Chinese demand powers exports
  Production of general machinery increased 7.4 percent in March 2003 compared to the same month of the previous year. Production of general-purpose machinery rose 1.7 percent on the year, while that of special-purpose machinery rose by 22.2 percent.
  Machinery forwarding increased 8.1 percent on the year. Forwarding of general-purpose machinery was up 5.5 percent and that of special-purpose machinery increased by 39.1 percent in February and by 20.5 percent in March.
  Exports rose 29.9 percent in March due to ever-increasing demand in China. Imports also increased on the year by 27.2 percent.
  Machinery orders displayed steady increase along with both production and forwarding. Orders for general-purpose machinery continued their rise, up by 22.3 percent on-year to 466.98 billion won and those of special-purpose by 12.7 percent to 225.155 billion won.

  Approach of high-demand season spurs consumption, exports
   Production of crude steel in March climbed 4.5 percent to 3.95 million M/T on a yearly basis. Domestic consumption of steel goods also rose, up by 6.4 percent compared to the same month the year previous to 3.72 million M/T. As the steel industry entered its high-demand season, consumption of bar steels increased slightly by 2.6 percent to 1.88 million M/T and that of section steel rose 12.4 percent to 1.48 million M/T on a yearly basis.

  Exports of steel goods were up in March, increasing by 29.8 percent on the year to $732 million.
  By item, exports of hot-rolled steel sheets surged 57.6 percent on the year to $128 million, those of cold-rolled steel sheets by 33.2 percent to $143 million and of galvanized iron, by 70.0 percent to $111 million.

  Exports to the biggest markets, namely China, the United States and Japan, all rose, growing by 46.5 percent, 67.8 percent and 5.4 percent on the year, respectively.

  Oil price increases undercut export performance
   March petrochemical production edged up by 3.1 percent on the year to 1.43 million M/T. By sector, both domestic sales (down 0.9 percent) and exports (down 17.7 percent) of synthetic resin slumped slightly, while domestic sales of synthetic fiber raw materials and synthetic rubber climbed 8.9 percent and 16.3 percent, respectively.
  Exports of petrochemicals recorded 668,000 M/T, an increase of 18.9 percent on a yearly basis. By sector, exports of synthetic resin and synthetic materials both declined on the year and those of synthetic rubber barely retained their previous level, pointing to the need for the industry to adopt a more aggressive international marketing strategy. The setback in exports is ascribed to poor performance in the Chinese market and a general cost increase in oil products.

  On the positive side, the oil price increases that had bedeviled the petrochem industry since November 2002 finally came to an end in March with the early conclusion of the Iraq Wa r. In fact, the price of Dubai crude decreased $2.43 per barrel from its February level to $27.53 in March. Despite the decrease, the cost of oil products such as low-density polyethylene (LDPE) rose by 3.0 percent from the previous month to $765, highdensity polyethylene (HDPE) by 1.8 percent to $695 and polypropylene by 1.2 percent to $813.

  Middle East demand slumps in face of Iraq War
  The impact of the Iraq War, the slumping global economy and strident competition from developing countries took its toll on textile exports in March. Those to the Middle East were hit especially hard. Overall, exports slid 2.9 percent on a yearly basis to $1.208 billion, but were up 19.6 percent on the previous month due to rising export unit prices and increased demand abroad.

  Exports to the United States, the biggest market for Korean textiles, declined 12.3 percent on the year to $200 million. Exports to Hong Kong and Japan were also off, declining 4.1 percent and 13.0 percent to $105 million and $72 million, respectively. In contrast, exports to China were up 11.3 percent to $203 million as were those to Vietnam by a spectacular 39.4 percent to $66 million.

  By item, exports of fiber raw materials (up 31.8 percent) and fiber yarn (up 10.0 percent) soared on the back of burgeoning demand in China and Vietnam. Moreover, exports of fiber fabric, the biggest export item in the textile category, climbed 5.6 percent, 44.3 percent, 26.1 percent to China, Vietnam and Guatemala, respectively. Overall though, total fiber fabric exports edged down 4.5 percent to $689 million on account of worsening economic conditions in the Middle East following the onset of war in Iraq.

  Textile imports in March grew 16.1 percent on-year to $474 million, boosted by a 38.9-percent increase in inbound shipments of apparel that accounted for half of all textile imports. Korea¡¯s international textile trade registered a surplus of $734 million in March.

  Order backlog mounts to two-and-a-half years of work for Korean yards
   Exports of newly constructed ships in the first quarter of 2003 surged 20.3 percent compared to the same period the year previous to $2.76 billion, thanks to sterling performances in the tanker sector. First-quarter exports of tankers, including liquid nitrogen (LNG) carriers totaled $1.716 billion, an impressive 120.7-percent improvement from the same period of the previous year, while overseas deliveries of cargo vessels such as bulk carriers slumped 17.6 percent to $959 million.

  Orders for new ships have been pouring in to Korean shipbuilders at record levels since last year with the result that every yard, on average, is guaranteed at least two-and-a-half years of work. Broken down by vessel type, tankers account for 48.6 percent of the total order backlog, container vessels 30.9 percent and LNG ships 11.6 percent.