[ Economy > Economic Update ]

 he industrial output index (2000=100) dropped 1.9 percent in May on a yearly basis to 110.7. The dip was caused by a decline in automobiles and machinery equipment production despite an increase in semiconductor output. The index was off 1.7 percent from the month previous for the same reason.

  While the production of PCs and CRT monitors edged down 0.7 percent in the manufacturing sector, increased production of LCD monitors and MOS DRAM memory raised output of intermediate goods by 1.3 percent. Consumer goods dipped 9.6 percent due to a decrease in production of both non-durable goods such as apparel and books and durable goods such as automobiles and color TVs.

  The Information & Communications Technology (ICT) manufacturing index rose 6.8 percent on the year. Briefly put, production of semiconductors grew on-year by 12.2 percent, audio/visual communication products by 9.1 percent and crude metal by 3.8 percent. On the other hand, production of automobiles shrank 6.3 percent on the year, machinery and equipment by 7.2 percent, apparel by a whopping 30.9 percent and textile products by 14.9 percent.

  On a seasonally adjusted monthly basis, semiconductor production increased 4.1 percent, audio/visual communication by 7.1 percent and refined oil by 9.0 percent while that of automobiles decreased 5.9 percent, machinery and equipment by 5.6 percent and miscellaneous transportation equipment by 9.1 percent.

   Ebbing of SARS epidemic impacts positively on China shipments
   June exports rose 23.3 percent on the year to record $15.77 billion and imports by 12.5 percent to $13.42 billion, resulting in a trade surplus of $2.35 billion. Exports in June have recovered their double-digit rate of increase thanks to a rise in exports to China following the subsidence of the SARS epidemic and the ¡°rebound¡± effect from the poor performance of the same month of the previous year.

  By item, automobiles and wireless communication devices continued their positive trend while semiconductors and PCs recovered slightly.

  Plateauing oil bill slows import rise
  June imports slowed due to the stabilization of oil prices and sluggish domestic demand but were still higher by 12.5 percent on the year because of extraordinarily low inbound shipments in June of 2002.

  From June 1st to June 20th, raw material imports rose 11.5 percent on a yearly basis to $4.47 billion and those of capital goods by 21.4 percent to $3.64 billion. Imports of consumer goods also rose 14.9 percent to $1.12 billion.

  Third straight month of surplus
  June was the third straight month that external Korean trade was in the black, boosting the 2003 aggregate trade balance by $2.35 billion to $3.39 billion.
  The trade surplus with China increased, that with the United States shrank considerably, while the deficit with Japan continued to expand.

  In detail, from June 1st to June 20th, exports to the United States underwent a double-digit increase as demand for automobiles and mobile phones soared. The decline of the SARS epidemic also resulted in a significant increase in exports to China.

  During the same period, imports from Japan, China and the United States were all up, rising on the year by 9.2 percent, 37.5 percent and 27.1 percent, respectively.

  Bond sales boost reserves
  At end-June 2003, foreign exchange reserves were up by $3.32 billion from end-May to $131.66 billion.
  The increase is mainly due to the sale of exchange equalization fund bonds, issued May 29th.
  Foreign exchange reserves at end-June comprised $126.1 billion in securities, $4.79 billion in deposits, $690 million in the national reserve position with the International Monetary Fund, $20 million in Security Deposit Receipts (SDRs) and $70 million in gold.

   Domestic sales still depressed but on-year exports strong
   Contractions in domestic sales and production-days caused domestic automobile production to decrease in May on the month by 14.9 percent to 259,000 units, and decline on the year by 12.6 percent.

  Ongoing negative consumer sentiment amidst a sluggish economy depressed domestic sales by 7.9 percent on the month to 120,000 units. Apart from Ssangyong, which recorded a 2.4-percent increase on the month, all carmakers experienced a decline in domestic sales.

  Exports to major markets Europe and North America were down 10.7 percent on the month to 148,000 units but up by 11.3 percent on-year. GM Daewoo¡¯s exports rose by 16.5 percent on the month, Ssangyong¡¯s by 5.3 percent and Renault Samsung¡¯s by an amazing 160.0 percent. Conversely, Hyundai and Kia¡¯s exports dipped by 16.5 percent and 5.5 percent on the month, respectively. On a yearly basis, all carmakers experienced export growth. By region, exports to West Europe rose 35.9 percent on the year, to North America by 4.0 percent, East Europe by 56.7 percent, to Asia by 126.5 percent and Africa by 57.7 percent.

  Demand in major markets takes a tumble
   Weakness in the global economy took its toll on May exports of electrical/electronic home appliances as they edged down 4.4 percent on the year to $915 million, and down 14.2 percent from April.
   Stunning growth was recorded in exports to Indonesia and the United Kingdom with shipments of $40 million and $37 million, representing increases of 35.4 percent and 20.0 percent on-year, respectively. Conversely, exports to the United States, the largest export market for this sector, slid 18.5 percent to $206 million. Furthermore, exports to Japan, China and Hong Kong were also down, falling 11.9 percent, 5.9 percent and 24.3 percent, respectively.

  Exports of video equipment (up 13.7 percent), refrigerators (up 10.1 percent), rotary equipment (up 0.6 percent) edged up slightly, while those of audio equipment were off by 30.6 percent. Specifically, exports of color TVs (up 42.3 percent), refrigerators (up by 10.1 percent) increased, while those of microwaves (down 49.3 percent), and VCRs (down 25.9 percent) declined considerably.

  Imports of electrical appliances in May increased 7.5 percent on the year to $282 million.
  Exports of electrical/electronic appliances in May accounted for 6.2 percent of the $14.7-billion export total for the month, while trade in this sector produced a surplus of $633 million.

  Production slackens but exports, orders strong
   Production of general machinery decreased 1.8 percent in May 2003 compared to the same month of the previous year. Production of general-purpose machinery dropped 5.5 percent, while that of special-purpose machinery edged up 4.6 percent.

  Machinery forwarding declined 1.3 percent on the year. Forwarding of general-purpose machinery slumped slightly by 2.2 percent and that of special-purpose machinery rose 2.9 percent.
  Exports rose 19.1 percent largely due to increasing demand in China. Imports also increased on the year by 9.0 percent.

  Despite a slight decrease in production and forwarding, machinery orders displayed a steady increase. Orders for general-purpose machinery continued their rise, up by 18.2 percent on-year to 449.28 billion won and those of specialpurpose machinery by an impressive 83.3 percent to 261.03 billion won.

  Output up as exports soar and highseason demand kicks in
   May crude steel production climbed 1.2 percent to 3.96 million M/T on a yearly basis. Domestic consumption of steel goods also rose, up by 11.1 percent compared to the same month of the previous year to 4.21 million M/T. With the highdemand season upon the industry, consumption of bar steels increased by 11.9 percent to 2.02 million M/T and that of section steel rose 10.7 percent to 1.82 million M/T on a yearly basis.

  Exports of steel goods were up in May, increasing by 17.1 percent on the year to $769 million. By item, exports of hot-rolled steel sheets surged 58.7 percent to $125 million, those of cold-rolled steel sheets by 22.9 percent to $140 million and of galvanized iron, by 45.9 percent to $102 million.

  Imports grew 34.4 percent on-year to $840 million. Imports of iron bars were up by 360.5 percent to $34 million, those of hot-rolled steel sheets by 57.4 percent to $180 million, cold-rolled steel sheets by 23.5 percent to $43 million and of galvanized iron, by 137.0 percent to $22 million.

  Exports promising but full recovery not yet in place
   May petrochemical exports rose 12.2 percent on the month to 834,000 M/T and on the year by 22.3 percent. Overall, exports of synthetic resin performed steadily, those of synthetic material showed signs of recovery, while shipments of synthetic rubber slumped.
  Against a background of stable demand in the Asian market, exports of synthetic resin increased by 11.0 percent on the month and were up by 31.7 percent on the year.

  In the case of synthetic material, exports continued their increase begun in March, recording a 24.7-percent rise on the month and a 3.2-percent rise on-year. However, it is premature to conclude that a complete recovery in petrochem exports is under way as the aggregate amount of shipments from January to May 2003 is lagging that of the same period of the year previous.

  Weakening major markets, SARS in China, hit exports
   The spread of SARS in China and slumping demand in other major markets prompted a 6.4-percent decline in May¡¯s textile exports on a yearly basis to $1.35 billion. On the previous month, however, they were up 5.9 percent due to rising export unit prices and increased demand.

  Exports to the United States declined 12.4 percent on the year to $237 million. Exports to Hong Kong and Japan also dropped, decreasing 10.9 percent and 10.6 percent to $105 million and $67 million, respectively. Conversely, exports to China were up 2.6 percent to $241 million as were those to Vietnam by 20.3 percent to $80 million.

  By item, exports of fiber raw materials edged down 1.2 percent because of a slowdown in Chinese demand due to the SARS epidemic, while fiber yarn increased slightly by 1.6 percent in the wake of increased export unit prices. Exports of fiber fabric, the biggest export item in the textile category, sank 6.9 percent on-year to $793 million as Brazil and Iran tightened import controls on textile imports. Moreover, exports of textile products dropped 8.4 percent in the face of tougher competition from developing countries and sluggish demand in major markets.

  Despite a 4.5-percent on-year increase in apparel imports that accounted for nearly half (44 percent) of all textile imports, lower imports of fiber yarn and fiber raw material resulted in a 3.7-percent fall in overall textile imports in May on the year to $418 million.

  Korean textile exports accounted for 9.2 percent of total exports in May, generating a surplus of $932 million for the month.

  Export trend falters due to delivery scheduling
   Exports of newly constructed ships in May declined 36.2 percent on the month to $816 million and were also down 27.6 on the same month of 2002. Industry observers judge the decrease to be temporary and caused by the current scheduling of deliveries. Exports are expected to fully recover in June as Korean yards continue to work on their enormous backlog and maintain operations at full capacity. Exports from January to May 2003 rose 17.1 percent compared to the same period of the previous year to $4.79 billion, thanks to superb performances in the tanker sector.

  Exports of all types of vessel experienced shrinkage in May, with bulk carriers and container vessels faring the worst. Exports of tankers slumped 25.7 percent on a yearly basis to $543 million, while those of container vessels dropped 31.4 percent to $269 million.

  Broken down by region, exports to Europe edged down 2.4 percent to $433 million, while those to Asia were off by 29.4 percent to $109 million.