South Korea factory output shrinks most since May 2020 on auto chip shortage

SEOUL (REUTERS) – South Korea’s factory output in October shrank at its sharpest pace in nearly 1½ years, government data showed on Tuesday (Nov 30), as global chip shortages continued to weigh on car production.

Industrial output last month unexpectedly fell by a seasonally adjusted 3.0 per cent month-on-month, Statistics Korea data showed, following a 1.1 per cent decline in September and logging the biggest decline since May 2020.

That also missed the 0.4 per cent growth tipped in a Reuters poll of analysts, by a large margin.

“Continued global supply chain disruption is one main factor behind the sluggish data,” Finance Minister Hong Nam-ki said, referring to the auto chip shortage.

A breakdown of data showed production of cars shrank 5.1 per cent, while that of primary metal fell 5.9 per cent.

“We expect better data in November, reflecting strong exports and a recovery in domestic demand and as the impact from high base fades,” Mr Hong said.

On an annual basis, output grew 4.5 per cent, sharply rebounding from a 1.8 per cent contraction in September and beating 3 per cent growth forecast in the poll.

Car production contracted 13.5 per cent year-on-year, but that was offset by 38.7 per cent growth in semiconductors output.

The global spread of Omicron coronavirus variant may further risk production going forward, with many countries closing their borders to prevent fresh outbreaks.

Meanwhile, Tuesday’s data also showed service sector output last month shrank 0.3 per cent month-on-month, while retail sales grew 0.2 per cent.

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