Dropping Production

 

According to an LG Economic Research Institute report released on April 29, Korean manufacturers’ year-on-year sales growth rate dropped one percentage point from a year earlier to 1.1 percent in 2014. Conversely, the percentages increased from 3.1 percent to 4.7 percent for American manufacturers, 1.2 percent to 4.4 percent for German, and 4.6 percent to 6.2 percent for the Japanese. The growth rates added up to 4.5 percent and 3.5 percent for Russian and Brazilian manufacturers, respectively.

Likewise, Korean manufacturers recorded a business profit rate of 3.7 percent during both of the one-year periods, while the rate went up from 3 percent to 4 percent for American manufacturing firms, from 5.8 percent to 6.6 percent for German and from 4.4 percent to 4.9 percent for Japanese. Korean manufacturing companies were at the bottom in terms of sales growth rate and the only group that failed to improve the business profit rate in 2014 among those in the 10 countries analyzed at this time. The report covered the manufacturing companies listed on the stock markets of the respective countries.

Their sluggish performance is attributable to the foreign exchange rate. The Korean currency was appreciated by 7 percent against the U.S. dollar between 2013 and 2014, the highest level on the list of the 10 countries. In contrast, the yen depreciated 24.5 percent and the appreciation of the euro was limited to 3.4 percent.

At present, the United States is striving for reshoring and Germany has put up the banner of manufacturing 4.0. Japan is working on manufacturing sector restructuring on the back of the weak yen. The ratio of capital expenditures to sales increased from 2.2 percent to 3.0 percent between 2010 and last year in the United States. The figures rose from 3.2 percent to 4.1 percent in Germany and from 2.6 percent to 3.2 percent in Japan during the same period. However, it declined from 4.5 percent to 3.4 percent in Korea between 2011 and 2014.

Copyright © BusinessKorea. Prohibited from unauthorized reproduction and redistribution