Manufacturing Crisis
The nation’s industrial output in May dropped 0.6 percent from the previous month, leading the industrial output to falling for the three consecutive months. It resulted mainly from the slow global economic recovery hurting its outbound shipments of its major products like cars and semiconductors, according to a report by Statistics Korea.
The agency said that the indices may worsen in June due to the impact of the Middle East Respiratory Syndrome (MERS).
By sector, production in the mining, manufacturing, gas and electricity industries fell down 1.3 percent in May from the previous month, which came after 0.2 percent and 1.3 percent falls in March and April respectively.
The decrease in production of automobiles and semiconductors, which were hit hardest by the sluggish exports, was a major cause of the overall decline. The export of semiconductors, automobiles chemical products fell 7.9 percent, 3.5 percent and 4.3 percent each.
The government said though MERS doesn't seem to have affected consumption in May, but said its impact will be felt in June. The Korea Institute for Industrial Economics and Trade said industrial output could decrease by between 4.5 trillion and 8.1 trillion won if the impact of MERS continues for three months.
In the meantime, the Bank of Korea said that the manufacturing confidence index, called the business survey index, stood at 66 in June, down seven points from the previous month. The monthly BSI marked its lowest figure since it posted 53 in March 2009 and lower than those in May and June last year when the national economy was hit by the sinking of the ferry Sewol.
An index of 100 is the baseline dividing positive and negative sentiments, with a figure below 100 meaning pessimists outnumber optimists and vice versa.
Large businesses were less pessimistic about business conditions than small and medium-sized companies in June while both of them saw their index will fall. The BSI of large businesses was 73, and that of SMEs was 57.
The weak business sentiments were common in both domestic demand-focused manufacturers and exporters with the index dropping 6 and 7 points, respectively.
The BOK survey showed that 25.8 percent of the sample respondents in the manufacturing industry said the sagging domestic demand has worsened business conditions. Another 19.7 percent attributed it to economic uncertainty and 12.2 percent picked heated market competition for it.
Industry experts forecast that the manufacturing sentiment would further weaken due to the mounting Greek default worries.