[ Economy > Economic Update ] 

Recovery Enters Mature Phase

May's output is up but the trend for the year slow. Meanwhile, the rise in exports and imports shows signs of leveling off

Indicators for May point to Korea's economic recovery having achieved maturity as the surge in production, exports and imports shows signs of abating. Industrial output growth during the first five months of this year has continued to slow, growing by 28.1 percent in January, then by 25.4 and 17.6 percent in the next two months. Rates of increase reached 16.9 and 20.0 percent in April and May, respectively. Production in the areas of information and technology (IT) covering semiconductors, computers, mobile phones and automobiles maintained high growth rates while the rate of new company foundation was also brisk. New company establishment in the January-May period of this year amounted to 19,304, marking a relatively high rate of growth compared with the 11,443 and 8,007 recorded in the same period of 1999 and 1998, respectively.

Commodity prices remain stable though inflationary pressures loom

Consumer prices in the first half of this year rose only 1.5 percent, maintaining a trend of stability compared with the same period of previous years, despite the continual rise in oil prices. Commodity prices are forecast to stabilize, rising by 2.5 percent on an annual average basis in the latter half of this year. However, there are lingering inflationary pressures from the areas of public fares, oil prices and agricultural and fishery products. The number of economically active persons increased 1.8 percent from the same month of last year and the participatory rate for economic activities edged up 0.6 percent to 61.5 percent. The number of jobless decreased markedly to 828,000 from the month earlier, pushing the unemployment rate down to 3.7 percent.

Trade surplus falls by two-thirds to $4.25 billion in 1st half

The nation's exports and imports amounted to $82.84 billion and $78.59 billion during the first half of this year , respectively, registering 25.5 and 44.7 percent growth rates, respectively. The trade surplus amounted to $4.25 billion in the first six months of 2000, equivalent to only 36 percent of that recorded during the same period of last year. Exports of leading items registered growth of up to 95 percent in the firs half and included semiconductors , computers, mobile phones, electric home appliances, petrochemical goods, general machinery and textile goods. Semiconductor prices, however, dropped 19.0 percent year-on-year while those of information and communications equipment and home appliances fell 7.8 percent. This indicates that the increase in the total value of exports in the first half has been thanks to rises in trading volumes rather than hikes in prices. Imports in the first half of the year continued to increase, surpassing the level achieved the first half of the final pre-crisis year of 1997. Imports on a monthly basis, though , have begun to decrease due mainly to slowing economic trends.

Machinery orders for May up 10.2 pct on year despite waning private sector demand

Orders received by domestic machinery makers in May increased sharply by 10.2 percent from a year earlier boosted by brisk demand from the public sector. However, demand from the private sector waned. Public sector demand posted an increase of 71.4 percent year-on-year, encouraged in particular by brisk orders for automotive vehicles, from the transportation (up 227.4 percent), electricity generation (up 45.0 percent) and other public areas (up 92.8 percent). Private sector orders on the other hand posted growth of only 6.0 percent, amid lackluster demand from the areas of food and beverages (off 58.7 percent) and construction (off 16.7 percent). Orders from the shipbuilding and automobile industries increased only slightly. Major areas of strong demand in the private sector were from the assembly machinery (up 30.6 percent), transportation, warehousing, and communications (10.6 percent), and the electrical and electronics industries ( 38.5 percent).

Domestic construction orders from the public sector continued to decrease while those from the private sector , boosted by a rise in demand for new housing rose 20.3 percent from a year earlier. Public sector orders slid by 48.6 percent year-on-year due to a drastic decline in orders for roads and bridges (off 78.5 percent), railways ( off 87.9 percent), and land formation (off 73.3 percent). Private sector construction demand all told registered an increase of 79.9 percent, spurred by booming orders for housing (up 82.6 percent), offices (up 126.3 percent), and warehouses and factories (up 455.8 percent).

In the meantime, the construction permit area, a major leading economic indicator, rose for industrial (up 35.9 percent) and commercial purposes (up 62.0 percent), but declined for residential (off 30.4 percent) and other purposes (off 31.7 percent). The entire permit area contracted by 9.3 percent, reversing the trend of sharp increases registered continually since April last year.

Auto sales boost May's retail and wholesale sales

Retail and wholesale sales in May rose 14.3 percent from a year earlier, thanks to brisk sales of passenger cars and a recovery in the wholesale sector. However, it should be borne in mind that in making yearly comparisons, sales were sluggish in May of 1999 due to strikes at major manufacturing sites. On a month-to-month basis, sales increased 1.5 percent, chiefly due to strong sales of automotive vehicles, compared with the previous month's torpid performance in this regard.

The wholesale sector registered an increase of 13.6 percent in sales from a year earlier, boosted by brisk sales of computer and office goods (up 65.8 percent), and oil and coal products (up 16.4 percent), despite poor sales of footwear (off 10.3 percent). The retail sector recorded an increase in turnover of 13.7 percent from the same period of last year, boosted by prospering department store sales (up 17.8 percent) and vending of other general merchandise (up 28.2 percent), despite sluggish sales of home fuel (off 19.6 percent). Forwarding of domestic consumer goods increased 19.7 percent from a year earlier due to a rise in forwarding of ready-made men's wear (up 54.8 percent), mobile phones (up 89.2 percent) and water purifiers (up 179.5 percent).

Exports in June rise 20.8 percent, imports rise 29.2 percent

Exports in June registered $15.48 billion, up 20.8 percent from a year earlier, boosted by a steady monthly rises in semiconductor prices. Imports surged 29.2 percent to $13.18 billion, amid signs that the economic upturn is abating. By item, exports of heavy and chemical products (up 38.9 percent) have continued to increase while the growth of light industry products (up 9.7 percent) slowed slightly. Shipments of semiconductors (up 64.2 percent), petrochemicals (up 79.1 percent), computers (up 56.4 percent) and general machinery (up 64.4 percent) flourished , while exports of automotive vehicles remained lackluster. By region, exports to the United States (up 36.0 percent) , Japan (up 39.6 percent), and the European Union (up 25.0 percent) maintained their upward trend. Those to the ASEAN nations remained torpid, growing by only 9.7 percent year-on-year. Imports in June amounted to $13.18 billion, up 29.2 percent from a year earlier, declining for the second straight month. The growth of imports in June compares with the monthly increases of 40 to 50 percent seen during the January/May period of this year. Resources and materials have continued to lead import growth while the ratio of resources and material to capital goods to consumer products in the import bill stood at 5:4:1. By region, imports were up 127.7 percent from the Middle East, 31.0 percent from ASEAN, 33.0 percent from Japan, 33.4 percent from the European Union, 11.6 percent from the United States, 19.4 percent from Latin America and 49.5 percent from Oceania. Imports from Africa, though, were down 8.4 percent.

Production, domestic sales and exports all mark strong gains

The production of automotive vehicles in May continued its upward trend reaching 287,000 units, up 26.5 percent from a year earlier. By type, the output of passenger cars amounted to 238,000 units, an increase of 28.7 percent from the same period last year, boosted by brisk production of all models with the exception of compact cars. The production of buses amounted to 22,000 units, up 14.5 percent year on year while that of trucks surged 21.0 percent to 24,000 units.

Domestic sales stood at 122,000, up 18.1 percent from a month earlier and up 27.3 percent on a year-to-year basis. Brisk sales of medium-sized and multi-purpose cars led the rise in domestic consumption. By model, sales of passenger cars rose to 89,000, up 32.8 percent year-on-year while those of commercial vehicles recorded a 14.6 percent increase to 33,000 units as sales of buses and trucks maintained their strength.

In the meantime, exports of cars, thanks to a steady increase in sales in North America and Western Europe, increased to 151,000 units, up 32.0 from a month earlier and up 14.3 percent from a year earlier. By model, outbound shipments of passenger cars rose to 139,000, up 14.8 percent year-on-year while those of commercial vehicles surged to 12,000, up 9.4 percent on a yearly basis. By region, exports to North America surged 77.9 percent while those to the United States, Latin America and Asia swelled by 95.1, 66.7 and 157.3 percent from a year earlier. Exports to the European Union also increased, rising by 6.3 percent. In contrast, shipments to Eastern Europe and the Pacific area dwindled by 46.6 and 46.1 percent, respectively.

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(% change from the same month of last year) 

   ( Units: cars, %)

Wireless products boost exports

Exports of electronic goods in May maintained their robust trend, due to brisk sales of all types of related goods covering industrial electronics, electronic components and home appliances. Exports in May registered a 35.5 percent increase from a year earlier to $5,431 million. Cumulative exports were also up significantly, rising 34.6 percent above their level of a year earlier. Exports of industrial electronic goods amounted to $1,926 million, up 60.1 percent on a yearly comparison. In particular, exports of CDMA and GSM mobile phones and low-priced computers mainly to the U.S. market contributed to the sharp rise in exports from this sector. Exports of wireless communication equipment rose 41.8 percent year-on-year while those of computers leapt 82.4 percent. Exports of wired phone sets, though, contracted 39.7 percent from a year earlier, as the Internet and wireless handsets have progressively captured more of the telecommunications market.

Exports of electronic components like semiconductors, electronic pipe, manual parts and tool parts maintained steady increases to register growth of 26.2 percent to $2,885 million. Shipments of semiconductors, which typically account for some 70 percent of all electronic parts exports, rose 47.6 percent while those of electronic pipe, manual goods, and tool parts recorded growth rates of 35.4, 64.1 and 44.3 percent, respectively. Exports of functional parts posted an 18.9 percent increase in this respect.

Exports of electronic home appliances also increased, rising 19.3 percent year-on-year to $620 million. Shipments of color television sets shrank 18.4 percent while those of VTRs rose 43.6 percent, pushing exports of all video-related goods to a 7.8 percent increase. Exports of audio-related goods such as radios and components were up 49.1 percent. Meanwhile, exports of electrical home appliances including refrigerators, washing machines and air conditioners surged 21.0 percent. Exports of electrical heating machines like microwave ovens, on the other hand, were off 2.0 percent.

(% change from the same month of last year) 

( Units: US$ million won, %)

Recovery fuels investment but import trend slows

Production of general machinery maintained its upward trend in May, registering growth of 29.7 percent on a year-to-year basis. By item, the output of construction/mining machinery surged 14.2 percent while those of metal press and air conditioning machinery recorded 38.5 and 41.3 percent increases, respectively. The production of textile and agricultural machinery increased 40.8 and 12.6 percent, respectively. Machinery forwarding also grew, advancing 25.8 percent on a year earlier. The conditions of brisk production and forwarding have been ascribed to steadily expanded facility investment and exports in response to the general recovery of the national economy.

Machinery exports, encouraged by large shipments to the Middle East and China, rose 50 percent on May of 1999, the largest year-on-year increase recorded so far this year. By item, agricultural machinery exports grew only 0.1 percent. Shipments of other machinery goods like air conditioning, construction/mining machinery recorded 194.5 and 20.0 percent increases, respectively. Textile machinery exports surged 76.0 percent during the same period.

Imports in May rose 13.4 percent, marking a slowing of their upward trend indicating their rate of increase has started to level off. Specifically, the weaker figures in May were due to a sharp drop in imports from the United States, down 37.5 percent from a year earlier. By item, imports of construction/mining machinery and air conditioning machinery slid 48.6 and 32.5 percent , respectively while those of metal and press machinery, textile machinery and agricultural machinery grew 102.7, 249.5 and 37.4 percent, respectively. Orders for general industrial machinery amounted to 278,630 million won, up 30.7 percent increase from a year earlier, while those for special purpose industrial machinery edged up 4.7 percent to 186,498 million won. Orders for logistical machinery increased 19.0 percent from a year earlier, while those for textile machinery and construction/mining machinery rose 65.8 and 23.0 percent, respectively. Metal press and agricultural machinery orders increased 6.4 and 5.0 percent , respectively, while those for industrial robots tumbled by 34.6 percent.

(% change from the same month of last year) 

( Units: million won, %)

Domestic demand, production, exports continue to make gains though imports fall

Production of crude steel grew to 3,780,000 M/T in May, up 12.1 percent over the same month of last year. Of total output, that of revolving furnace goods rose 6.2 percent to 2,096,000 M/T while the production of electric furnace goods surged 20.3 percent to 1,684,000 M/T.

World production of crude steel climbed to 68,529,000 M/T in May, up 9.1 percent on a yearly basis as output by the Commonwealth of Independent States (CIS), the United States and Japan surged in the wake of the recovery in demand from North America, Europe and Southeast Asia. Domestic demand for steel goods soared to 3,289,000 M/T, up 22.0 percent from a year earlier, marking two months of consecutive growth. Domestic consumption of sectional steel leapt to 1,628,000 M/T, up 32.3 percent from a year earlier, amid increasing demand for H-section steel for construction purposes. Consumption of steel boards, mainly  thick and zinc-coated boards continued to increase, growing by 13.3 percent from a year earlier to 1,610,000 M/T. Thanks to the recovery in domestic sales, production rose to 4,292,000 M/T, up 18.6 percent year-on-year. Exports of steel products reached $777 million, up 48.0 percent on May of 1999. By item, exports of cold-rolled and sectional steel products registered significant increases of 64.7 and 60.0 percent year-on-year, amounting to $190 million and $44 million in value terms, respectively . However, exports of steel pipe dropped for the second straight month to $2 million, down 83.3 percent from a year earlier. Exports to the United States, Japan and the European Union rose markedly.
 
Steel imports, by comparison, fell 27.1 percent from a year earlier to $544 million in May, as imports of hot-rolled steel boards waned. By item, imports of hot-rolled steel boards amounted to $127 million, up 54.7 percent from a year earlier while those of steel pipe and sectional steel goods registered markedly high growth of 56.8 and 59.6 percent to $26 million and $11 million in value terms, respectively.

(% change from the same month of last year) 

Production, forwarding down as export and domestic markets  remain weak

 Business conditions in the Korean petrochemical industry remained generally slow in May although forwarding increased slightly. Production shrank 14.9 percent from April to 1,075,000 M/T, due largely to torpid domestic and overseas markets. May's output represents a decrease of 1.7 percent from a year earlier and production is expected to remain sluggish in the absence of any significant changes in supply and demand. Given that monthly output in the latter half of last year exceeded 1,200,000 M/T, corresponding figures for 2000 are likely to be well below that level. While forwarding for both domestic and export purposes rose to some extent compared with the previous month, it continued to remain below the level of last year. Domestic consumption fell to 594,000 M/T, down 8.9 percent from a year earlier. In particular, the domestic consumption of chemical textile material, the mainstay item of the domestic market, is expected remain lackluster for the foreseeable future, due mainly to lower operational rates and the rise of integrated corporations. In contrast, exports remained below last year evel but rose in May to 479,000 M/T, up 11.9 percent from a month earlier.

Value of overseas shipments boosted by price hikes

Textile exports in May were up 16.5 percent from a year earlier to $1,707 million, boosted by recovery in Western industrial, Chinese, Southeast Asian, and Latin American markets. Exports amounted to 320,000 tons, up 16.5 percent year on year while the average unit price stood at $5.32 per kilogram, a 9.9 percent increase.

Exports of textile material including nylon and polyester textile rose to $75 million, an increase of 28.7 percent, year-on-year. Shipments of textile yarns amounted to $148 million, up 15.3 percent on a year-to-year basis lead by chemical textile F yarn and fabric yarn. Textile yarn exports have grown in value despite the drop in actual quantity shipped. This has been due to the sharp rise in prices of original yarn under constant pressure of rising oil prices.

Exports of textile fabric goods amounted to $968 million, up 18.5 percent from a year earlier, thanks to a rise in demand for fabric goods and cotton goods with the onset of the summer season. Exports of textile products led by clothing surged to $516 million, up 11.8 percent from a year earlier, due chiefly to a rise in shipments of shirts and trousers. By region, exports to China including Hong Kong amounted to $426 million, an increase of 18.7 percent from the corresponding period last year, in the wake of booming sales of polyester F yarns, knit clothes and increasing Chinese imports of textile products for manufacture and export purposes. Exports to the United States registered a $316 million, up 16.9  percent from a year earlier, due to brisk sales of polyester goods and fabric products. Shipments to Japan also rose, up 6.0 percent year-on-year to $123 million, thanks to flourishing sales of nylon products and mixed spinning cotton goods. Imports soared to $368 million, up 26.2 percent from a year earlier amid a rising influx of resources and materials to cope with the upswing in exports . Imports of relatively low-priced chemical textile, mixed spinning and fabric and clothing continued to increase from developing countries such as China and India while high-end goods like pants, shirts and jackets rose from industrial economies like Italy and Japan.

Exports by the nation's shipbuilders were valued at $500.83 million in May, up 13.5 percent from a year earlier . By vessel type, exports of oil carriers surged year-on-year to $200.58 million in May, up 13.7 percent from a year earlier but down 23.9 percent from the month before. Overseas sales of cargo carriers like container vessels and bulk carriers rose to $200.96 million , up 13.4 percent year-on-year and up 8.4 percent on April 's total. Meanwhile, orders received by domestic shipbuilders have continued their phenomenal increase as operators move to replace aging fleets of very large crude carriers and as demand for 4,000 TEU-class container vessels grows to cope with the ever-increasing volume of international shipping .