Meaningless Growth?

 

Statistics Korea announced on Aug. 31 that Korea’s total industrial output edged up by 0.5 percent month-on-month in July this year, while retail sales and capital investment increased by 7 percent and 1.3 percent during the same period, respectively. “This is the first time in five months that production, investment, and consumption increased all at the same time,” the agency explained, adding, “It seems that the national economy is recovering from the slump of the second quarter.”

Things are not favorable yet, though. In July, the manufacturing sector recorded an inventory ratio of 129.2 percent, the highest since the 129.9 percent of December 2008. The ratio increased by 0.6 percent from a month ago, and 4.8 percent from a year ago.

The increase in inventory was led by automobile, TV, and petrochemical product stocks. Specifically, the automobile inventory increased 11.6 percent month-on-month, while that of audio/video products went up by as much as 29.7 percent. This resulted in a drop in factory utilization rate. The average operating ratio of the manufacturing sector decreased half of a percentage point to 74.7 percent between June and July.

In the meantime, the Bank of Korea released its business survey index (BSI) and economic sentiment index (ESI) for Aug. 2015 on the last day of the month. According to the data, the economic sentiment regarding the manufacturing sector recovered in July, but stepped back in the following month. The BSI for Aug., which covered 2,947 manufacturing and non-manufacturing firms, lost two points to 68.

“This seems to be attributable to the slowdown of the Chinese economy and less operating days during the vacation season,” said the central bank, continuing, “Things are less likely to have improved in Aug. given that actual indices and economic sentiments have shown no significant gap.”

The BSI concerning large corporations declined by no less than three points to 72 in a single month, while that regarding smaller firms lost one point to 62. The figure dropped by five points to 68 for exporters, and one point to 68 for non-exporters. Sales, product inventory, and production facility showed some improvement, whereas facility investment execution, profitability, raw material prices, financial conditions, and employment turned for the worse.

On the contrary, the economic sentiment of the service industry turned for the better for two months in a row, led by the leisure, transport, and lodging sectors. The non-manufacturing BSI gained one point to 70. 

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