[ Economy > Economic Update ]

 he national industrial production index rose in July to 108.0 (2000=100), up 0.7 percent year-on-year. The slight gain in output was made on the back of increases in production of semiconductors, audio/video/telecom equipment and petrochemical products, despite falling production of automobiles and textiles. Month-on-month, though, the index fell 3.9 percent due to dips in production of automobiles and machinery.

  Production of capital goods in the manufacturing sector fell by 4.7 percent compared to June due to slowdowns in output of steel, crude oil carriers and switches for wireless communication systems. Production of consumer goods was also down, off 4.3 percent on the year with deceases in both durable goods and non-durable goods due to slides in output of automobiles, conventional color TVs, men¡¯s and women¡¯s apparel.

  The major bright spot in the manufacturing sector as a whole was intermediate goods where output rose 4.8 percent led by increases in LCDs and MOS DRAM memory chips. Meanwhile, the manufacturing sector¡¯s ICT (Information Communication Technology) index increased 14.5 percent compared to July 2002.

  In a comparison of year-on-year production among the major industrial sectors, the semiconductor sector was up 25.2 percent, audio/video communications up 8.4 percent, and petroleum refining up 14.6 percent. Conversely, automobile manufacture was off a precipitous 30.3 percent, textile products were down by 12.2 percent, and apparel and leather goods off 23.4 percent.

  On a seasonally adjusted basis, semiconductors were up 9.7 percent, food and beverages were up 3.8 percent, and office equipment up 6.2 percent. However, output by the automobile industry was revealed to be down by 42.1 percent, machinery equipment off by 5.9 percent and other electric machinery, off by 6.3 percent.

   No Impact by Cargo Workers¡¯ Strike
   Exports in August reached $15.48 billion, up 10.9 percent from the previous month, while imports also increased but by a smaller margin - 5.4 percent - to $13.56 billion, posting a trade surplus of for the month of $1.93 billion. Exports in August surpassed those of July by a small margin, despite the strike by the Cargo Transport Workers¡¯ Union. However, the strength of the upward trend was dampened somewhat by unfavorable comparison with the 18.6-percent year-on-year rate of growth recorded in August 2002. By item, exports of automobiles and wireless communications devices remained strong, while semiconductor and computer exports recovered marginally.

  Crude Stockpiles Put Brake on Imports
  The three-month rising trend in imports leveled off in August as crude oil imports slumped on account of a heavy build-up of crude stocks in July. During the Aug. 1st to 20th period, imports of raw materials reached $4.86 billion, up 4.8 percent year-on-year, while those of capital goods were up 6.1 percent from the previous year to $3.73 billion. Imports of consumer goods increased by 13.0 percent to $1.14 billion. By item, semiconductors imports grew by 16.3 percent to $1.13 billion, those of steel and metals posted a 28.0-percent gain to $890 million, while imports of agricultural, forestry and marine products grew by 9.9 percent to $680 million. Home electronics imports were up by 16.3 percent to $180 million, but inbound shipments of machinery slumped 10.3 percent from the previous year to $980 million.

  China Trade Adds to Surplus
  The growth in the trade surplus continued for the fifth straight month in August, with the $1.93-billion addition for the month bringing the cumulative total for year to $5.80 billion. By region, the trade surplus with China increased, while that with the United States narrowed. By comparison, the trade deficit with Japan deepened in August.

  An examination of exports on a regional basis during the Aug. 1st to 20th period, reveals that exports to the United States fell again in August following their 7.5-percent drop in July, this time by 5.2 percent, largely due to slowed automobile shipments stemming from strikes. Exports to China increased by a large margin on the back of a strong rise in shipments of semi-finished goods to meet demand from China¡¯s export-driven mobile phone and computer industries.

  With regard to imports on a regional basis, during the Aug. 1st to 20th period, inbound shipments from Japan increased by 11.6 percent year-on-year, while those from China increased a whopping 20.7 percent. Imports from the United States on the other hand, were off slightly by 0.3 percent.

  Korea¡¯s FX Stock Climbs to New Heights
  Foreign exchange reserves at the end of August 2003 increased by $3.28 billion from the end of July to $136.19 billion, due to increases in operating gains and reserve deposits made by banks. Broken down by type, foreign exchange reserves comprised $115.0 billion in marketabl securities, $20.5 billion in deposits and $670 million in currency positions at the International Monetary Fund (IMF), $20 million in special drawing rights (SDR) and $700 million in gold.

   Hyundai, Kia Strikes Take Toll on Auto Exports
   July automobile production tumbled to 147,000 units, down a massive 42.6 percent on June¡¯s total and 36.8 percent on the year due to strikes at Hyundai Motor Company and Kia Motors. Production of passenger vehicles fell to 126,000 units, down 43.4 percent month-on-month and 36.0 percent year-on-year. At the same time, production of commercial vehicles slumped 37.1 percent on-month and 39.1 percent on-year to 21,000 units.

  Domestic auto sales edged down 4.5 percent from June to 101,000 units in July, (down 20.8 percent on a yearly comparison). This was the result of consumers delaying their purchases in anticipation of the cut in special consumption tax that took effect July 12th, as well as inadequate supply of vehicles due to strikes at major manufacturers.

  With strikes constraining production, auto exports fell 40.4 percent on-month and by 21.5 percent on-year to 86,000 units. Of this total, passenger vehicles exports accounted for 79,000 units, down 41.7 percent on May¡¯s total and off 24.2 percent compared to June 2002, while exports of commercial vehicles slid 19.2 percent to 7,000 units.

  Export Marketing Pays off Big
  Faced with poor consumer sentiment at home, electronics/electrical manufacturers switched their attention to overseas markets in July and were rewarded for their efforts by a boost in exports on a monthly comparison of 20.2 percent. Exports to China were particularly vibrant as wholesalers stocked up on inventory ahead of year-end demand; this was not the case for the United States and Taiwan where economic downturn dampened demand for Korean export products. All told, though, exports of information devices posted their first double-digit year-on-year increase since September last year when they grew by 15.8 percent. Information device exports comprised 8.6 percent of the $15.467 billion total in exports. Meanwhile, trade in information devices in July generated a surplus of $873 million.

  July exports of household electronic goods increased by 12.4 percent on the same month the year previous and by 2.0 percent on June to $976 million, powered by increased demand for digital convergence products such as digital TVs and DVRs (digital video recorders). Meanwhile, imports also increased, growing by 3.1 percent on a yearly comparison to $269 million in the wake of increased imports of visual equipment.

  Exports of household electronic products accounted for 6.3 percent in July of total national exports of $15.467 billion. The surplus in household electronic goods trade amounted to $707 million in July

  Semiconductor exports in July grew by 15.1 percent year-on-year and by 11.9 percent on a monthly basis to $1.613 billion. As DRAM semicon prices continued to increase, exports of semiconductors achieved a double-digit year-on-year rise for the first time since they grew by 39.6 percent in January 2003. Semicon exports in July accounted for 10.4 percent of total exports. However, semiconductor trading in July resulted in a $102-million deficit.

  Non-production Machinery Leads Upswing
   Machinery production in July 2003 was up by 4.5 percent year-on-year. Production of general-purpose machinery increased 3.1 percent over the same period, while production of specialpurpose machinery led the overall rise in the category, rising 6.5 percent over July of 2002. Within the general-purpose machinery category, production of refrigeration and heat exchange equipment fell 16.1 percent in July in sharp reverse from an 18.9-percent increase in June. On the other hand, production of fabrication machinery fell 5.1 percent in July following its 7.4-percent decline in June. Meanwhile, production of materials handling equipment, agricultural machinery and construction/mining equipment increased by 36.2 percent, 25.3 percent and 14.7 percent, respectively. Due to an increase in exports to China, overall exports increased 21.1 percent. By item, the trend in exports of refrigeration and heat exchange equipment turned negative with a 33.5-percent decline, while exports of textile, construction/mining, and fabrication machinery gained by 42.4 percent, 47.4 percent and 62.5 percent, respectively.

  Construction Slowdown Dampens Production Gains
   Steel production posted a gain of 2.8 percent year-on-year to 4,603,000 metric tons in July. Output in the steel bars and section steel category remained almost level, edging down by 0.1 percent to 1,663,000 metric tons as increases in production of reinforcing bars helped offset sluggishness in section steel demand due to a slowdown in the construction industry. Production within the overall sheet steel category increased 4.1 percent year-on-year to 2,469,000 metric tons, led by significant gains in output of hot rolled steel and zinc plated steel.

  Production of most items within the steel products category increased. On a year-to-year comparison of production by item, hot rolled steel was up 51.9 percent to $143 million, cold rolled steel was also up, by 21.3 percent to $139 million, steel plate gained a huge 69.9 percent to $31 million, while zinc-plated steel also grew massively, by 25.3 percent on the year to $97 million.

  In regard to exports, shipments to China and Japan increased by 71.8 percent and 13.4 percent compared to July 2002, while those to the United States fell by 23.4 percent over the same period.

  Strong Prices Boost Export Value
   Exports of the three major petrochemical products, synthetic resin, synthetic fiber materials and synthetic rubber, showed a significant aggregate increase of 10.0 percent year-on-year to 905,000 metric tons in July. Production of synthetic rubber declined over the year, while production of synthetic fiber materials led exports through increased demand from China. Cumulative petrochemical exports recovered in July increasing 5.5 percent year-on-year to 5,625,000 tons as exports of synthetic fiber materials rebounded in addition to continuing strong shipments of resin. In value terms, the volume of petrochem exports increased 24.5 percent to $4.379 billion as unit prices strengthened in the first half of the year.

  Weak Demand in Major Markets Hits Exports
   Textile exports in July fell 2.9 percent to $1.446 billion due to weakening consumer sentiment in the face of the global economic slowdown as well as increased competition in major export markets such as the United States and Japan. By country, exports to the United States, the biggest export market, shrank 9.1 percent year-on-year to $314 million, while exports to Hong Kong and Japan also fell, dropping by 14.5 percent and 8.2 percent, respectively to $96 million and $73 million.

  By product, exports of yarn increased 11.4 percent on a yearly comparison due to increased demand from major export markets such as China, Vietnam and Turkey despite declining unit prices. On the other hand, exports of fabric, the largest export item, fell by 3.9 percent on a yearly comparison to $759 million due to decreased demand for raw materials by those countries that export to the United States. A contributing factor was increased competition from developing countries such as China. Meanwhile, exports of fabric products also fell, falling by 6.2 percent year-on-year due to delayed economic recovery in advanced country markets as well as heightened competition.

  Cumulative Exports up 24.3 Percent
   Exports of vessels in July 2003 amounted to $772 million, down 43.6 percent from the previous month but up 37.9 percent compared to the same month last year. The month-on-month decrease in exports is due to shipbuilders¡¯ construction and delivery schedules. The shipbuilding industry operates at close to full capacity, thanks to stable labor relations and an ample volume of back orders. Cumulative exports for the year to the end of July were up 24.3 percent on a yearly basis to $6.936 billion largely due to strong exports of tankers. By market, flag-of-convenience ship registry countries, Panama and Liberia accounted for $3.015 billion of vessel purchases, while exports to Europe amounted to $2.34 billion. Exports to each market was up 3.5 percent and 27.0 percent, respectively. Exports to Asian clients also showed a significant increase, growing by 71.6 percent to $1.167 billion.