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(2nd LD) S. Korea suffers fall in production, consumption, investment in July

11:10 August 31, 2022

(ATTN: UPDATES with more details in paras 9, 11)
By Kim Soo-yeon

SEOUL, Aug. 31 (Yonhap) -- South Korea's industrial output, retail sales and investment declined together for the first time in three months in July amid heightened external uncertainty, data showed Wednesday.

Industrial output fell 0.1 percent in July from the previous month, compared with a 0.8 percent on-month increase in June, according to the data from Statistics Korea.

Compared with a year earlier, industrial production grew 3.8 percent.

Retail sales, a gauge of consumption, fell for the fifth straight month in July as high inflation and rising interest rates weighed on private spending.

This file photo taken Aug. 11, 2022, shows stacks of containers at a port in South Korea's southeastern city of Busan. (Yonhap)

Retail sales declined 0.3 percent in July, following a 1 percent on-month fall the previous month.

Consumption fell for the fifth straight month for the first time since the statistics agency began compiling related data in 1995.

Facility investment retreated 3.2 percent on-month in July, compared with a 4 percent increase the previous month.

It marked the first time since April that industrial output, consumption and facility investment posted on-month falls together.

"The South Korean economy is maintaining recovery momentum, but there is heightened uncertainty about its growth path due to global inflation, growth concerns and rising interest rates," the finance ministry said in a statement.

Last month, output in the mining, manufacturing, gas and electricity industries fell 1.3 percent on-month, the first decline in three months. The decline was led by the faltering production of memory chips. Chip production contracted 3.4 percent on-month.

Retail sales declined, but service output rose 0.3 percent on-month as production in in-person services, such as accomodations and restaurants, expanded amid relaxed virus curbs.

The South Korean economy is slowing down as it is grappling with runaway inflation and export growth could lose momentum amid heightened external uncertainty.

The country's consumer prices, a key gauge of inflation, soared 6.3 percent on-year in July, the fastest in nearly 24 years. High inflation erodes people's purchasing power and could weigh on consumption.

The Bank of Korea (BOK) raised the key interest rate by 0.25 percentage point to 2.5 percent last week to tame inflation. The decision followed its first-ever "big-step" rate hike of 50 basis points in July and marked the seventh rate increase since August last year.

A rate hike is meant to curb inflation, but it could increase debt-servicing burdens and slow down economic growth.

Exports, the main driver of Korea's economic growth, rose 9.4 percent on-year in July, marking the 21st consecutive month of growth.

But the nation suffered a trade deficit for the fourth straight month as high oil and commodity prices pushed up the country's import bills.

In its latest revised outlook, the BOK lowered its 2022 economic growth forecast to 2.6 percent from 2.7 percent. South Korea's central bank sharply raised this year's inflation estimate to a 24-year high of 5.2 percent from 4.5 percent.

A shopper selects groceries at a discount store in Seoul amid high inflation on Aug. 29, 2022. (Yonhap)



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