GWACHEON, South Korea—South Korea's factory output fell for a third consecutive month in August as strikes in the automobile sector and two typhoons slowed business activities, paving the way for the central bank to deliver another policy rate cut.
Industrial production fell a seasonally adjusted 0.7% from a month earlier in August, following a revised 1.9% drop the preceding month, according to Statistics Korea. In June, industrial production also fell by 0.5%.
The Ministry of Strategy and Finance said in a statement that the weak factory output was due largely to a partial strike by auto workers who had scaled down the production in August by 116,000 vehicles.
Two typhoons that hit the country in August also led to sluggish investment in production facilities and construction, said the ministry statement.
Kiwoom Securities Analyst Ma Ju-ok said the economy was likely to have bottomed out in August and will start to recover in October, adding that he expects the Bank of Korea to lower the benchmark rate to help stimulate the economy.
"The economy will likely gradually pick up from October after being flat in September," said Mr. Ma. "The central bank will likely cut the policy rate in October for stimulus." The benchmark rate is now at 3.0%.
The central bank already cut the rate by 0.25 percentage points in July this year in a bid to boost the slowing export-reliant economy hit badly by shrinking demand overseas, as Europe's debt crisis drags on and weakens the global economy.
The August decline in factory output, however, was not as steep as a 1.5% fall tipped by the median forecast of nine economists surveyed by Dow Jones Newswires.
From a year earlier, the August reading was up 0.3%, compared with a revised 0.2% rise in July and a 0.2% fall forecast in the Dow Jones Newswires poll.
The new leading indicator, a closely watched reading to predict economic conditions ahead, edged down to 100.1 in August from the preceding month's revised 100.3.
A reading above 100 suggests conditions are likely to improve. The August data showed that capital investment, including the installment of machinery, plunged 13.9% month-on-month, compared with a 1.5% rise in July.
The average capacity utilization rate at factories also fell to 73.8 in August from 77.0 in July, according to the data.
The government has announced two fresh stimulus packages this year—one in June and the other this month—to bolster the slowing economy.
The combined stimulus was worth 13.1 trillion South Korean won ($11.7 billion) in total, equivalent to 1% of South Korea's gross domestic product.
In June, the government cut its 2012 growth forecast to 3.3% from its earlier projection of 3.7%. Many private think tanks expect growth to be below 3% this year.
wsj.com
Industrial production fell a seasonally adjusted 0.7% from a month earlier in August, following a revised 1.9% drop the preceding month, according to Statistics Korea. In June, industrial production also fell by 0.5%.
The Ministry of Strategy and Finance said in a statement that the weak factory output was due largely to a partial strike by auto workers who had scaled down the production in August by 116,000 vehicles.
Two typhoons that hit the country in August also led to sluggish investment in production facilities and construction, said the ministry statement.
Kiwoom Securities Analyst Ma Ju-ok said the economy was likely to have bottomed out in August and will start to recover in October, adding that he expects the Bank of Korea to lower the benchmark rate to help stimulate the economy.
"The economy will likely gradually pick up from October after being flat in September," said Mr. Ma. "The central bank will likely cut the policy rate in October for stimulus." The benchmark rate is now at 3.0%.
The central bank already cut the rate by 0.25 percentage points in July this year in a bid to boost the slowing export-reliant economy hit badly by shrinking demand overseas, as Europe's debt crisis drags on and weakens the global economy.
The August decline in factory output, however, was not as steep as a 1.5% fall tipped by the median forecast of nine economists surveyed by Dow Jones Newswires.
From a year earlier, the August reading was up 0.3%, compared with a revised 0.2% rise in July and a 0.2% fall forecast in the Dow Jones Newswires poll.
The new leading indicator, a closely watched reading to predict economic conditions ahead, edged down to 100.1 in August from the preceding month's revised 100.3.
A reading above 100 suggests conditions are likely to improve. The August data showed that capital investment, including the installment of machinery, plunged 13.9% month-on-month, compared with a 1.5% rise in July.
The average capacity utilization rate at factories also fell to 73.8 in August from 77.0 in July, according to the data.
The government has announced two fresh stimulus packages this year—one in June and the other this month—to bolster the slowing economy.
The combined stimulus was worth 13.1 trillion South Korean won ($11.7 billion) in total, equivalent to 1% of South Korea's gross domestic product.
In June, the government cut its 2012 growth forecast to 3.3% from its earlier projection of 3.7%. Many private think tanks expect growth to be below 3% this year.
wsj.com
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