Korea’s industrial output grew for the 13th consecutive month in July, a clear indication that the economy has recovered from the recent global economic downturn, Statistics Korea said yesterday.
Industrial production expanded 15.5 percent last month from a year ago, while it rose by 1.1 percent from June because of increased demand for semiconductors, autos and industrial parts. Manufacturing plants on average operated at 84.8 percent of capacity, the highest that the government has recorded since January 1980, when it began keeping records. The operating rate in June was 83.9 percent.
“Despite the 10.6 percent contraction in the shipping and other transportation equipment sectors, last month’s overall output posted solid gains, bolstered by semiconductors, electronics parts and machinery equipment,” the agency said.
Semiconductor and electronic parts production rose 27.6 percent on-year, while machinery equipment output jumped 54.1 percent. But the report showed the leading economic composite index dipping by 0.4 percentage points from June, the seventh consecutive month of contraction. The index is used to predict economic performance eight to 15 months ahead.
Retail sales grew 1.2 percent in July from a month earlier and 8.6 percent from a year earlier because of rising purchases of electronic appliances. Facility investments increased 33.5 percent on-year, though it contracted by 3.1 percent from June. Output in the service sector grew 3.4 percent on-year in July, but fell 1.0 percent from June.
Analysts warn, however, that industrial production could slow because of uncertain global conditions in the months ahead.
Korea plans to inject more than 5 trillion won ($4.2 billion) into pushing its technology capabilities up to 96 percent of those of advanced industrialized countries, the government said yesterday.
The Ministry of Knowledge Economy said the 10-year plan finalized at the National Science and Technology Council aims to revamp how the government supports research and development in such areas as solar cells, wind power generation, bioenergy and fuel cells.
Renewable, clean energy generation is one of the fastest growing industries in the world with the global market standing at $162.0 billion in 2009.
The local market reached 4.02 trillion won last year from just 139.4 billion won in 2004.
As of this year, Seoul has earmarked 423.5 billion won for renewable energy R&D support, up 19.5 percent from 354.4 billion won in 2009. “In the past, state budgets were allocated to various ministries that have been cited for inefficiency and for supporting overlapping R&D projects,” said Hwang Soo-sung, head of the ministry’s renewable energy division. He said in the future, research work will become an interministerial effort with centralized support, coordination and oversight.
Coordination will also take place for so-called megaprojects that could receive up to 300 billion won in state funding. Up to 15 such megaprojects are being proposed.
The ministry said that if all goes according to plan, the country’s technology should reach the 96 percent level from the present 76.7 percent, while parity may be reached in commercially viable areas such as solar energy, wind power and fuel cells.
Currently the country’s technology level stands at 86.6 percent in solar energy generation, 81.1 percent in wind power and 77.8 percent in fuel cells vis-a-vis technology leaders such as the United States, Japan and some European countries
Sales by Korea’s five automakers jumped 28.8 percent in August from a year earlier, driven by strong demand both at home and abroad, company data showed yesterday.
The automakers, led by industry leader Hyundai Motor, sold a combined 512,496 vehicles in domestic and overseas markets last month, compared to 397,827 units in August of 2009, according to the data released by the companies.
Combined domestic sales increased 20.1 percent on-year from 90,808 units to 109,769 units with overseas shipments jumping 31.2 percent to 402,727 vehicles from 307,019 units. The increase in domestic sales was towed by Kia Motors, an affiliate of Hyundai Motor and the country’s second largest automaker, which sold 38,620 vehicles here last month, up 53 percent from 25,184 units a year before. The company also sold 111,921 vehicles in overseas markets, up 56 percent from 71,896 units a year earlier.
Hyundai Motor’s overseas sales soared 19.7 percent on-year to 238,951 units, but its domestic sales inched up only 5.4 percent to 49,362 units, though it was still the largest sales volume by a single automaker here. Sales by Renault Samsung Motors Company, the South Korean unit of French automaker Renault SA, also jumped 34 percent on-year even though its domestic sales dropped 5.3 percent to 10,153 units as exports surged 162.7 percent to 8,736 units to more than offset the minor drop in domestic sales.
Ssangyong Motor Company, South Korea’s smallest carmaker, said its monthly sales more than tripled from a year earlier when its production nearly halted due to striking workers illegally occupying one of their plants.
Korea posted a trade surplus for the seventh consecutive month in August, at $2.07 billion, the Ministry of Knowledge Economy said yesterday.
Exports rose 29.6 percent on-year to $37.52 billion, while imports gained 29.3 percent to $35.45 billion.
The August trade surplus was smaller than the $5.51 billion surplus in July, which was the third highest on record.
Korea became the world’s seventh biggest exporter for the first time in the first half of the year, up from ninth place. The government expects the total trade surplus will amount to $32 billion this year.
The decline in the August trade surplus was mainly caused by a fall in the exports of ships and mobile phones because many workers were on holiday in August. Export growth normally recovers in September. The August trade surplus was the smallest since March at $1.82 billion. Foreign demand for semiconductors, liquid crystal displays and oil products remained steady from July.
Shipments of semiconductors rose 59.6 percent on-year to $4.59 billion from a year earlier, while auto exports increased by 27.5 percent to $2.18 billion. In contrast, exports of ships fell 10.8 percent, while exports of mobile telecommunication equipment fell 22.8 percent.
Imports also rose because of increased domestic demand for raw materials, including oil, natural gas and coal, as well as capital goods and consumer goods.
Exports to China, Korea’s largest trading partner, increased 29.9 percent, while shipments to the United States rose by 49.4 percent, Japan by 45.3 percent, Southeast Asia by 32.8 percent and the EU by 30.1 percent.
Korean exports have continuously risen since November 2009, and the government has revised upward its trade surplus target to $32 billion from $23 billion. The government estimates exports this year will grow by 26 percent on-year to $458 billion, while imports will rise 32 percent to $426 billion. Exports in the second half is forecast to grow by 19 percent from a year earlier to $236.5 billion, while imports will rise by 25 percent to $22.2 billion.
Korea could see a record import deficit with Japan this year. Japan is a key source of machinery and industrial components for local manufacturers.
Korea’s position as the world’s seventh biggest exporter in the first half was only surpassed by China, the U.S., Germany, Japan, the Netherlands and France.
“Based on current trends, Korea will likely advance to become the world’s eighth biggest exporter at the end of this year,” said Kim Kyung-sik, assistant minister for trade and investment. He expected the trade surplus in September will be larger than in August, but because of the Chuseok holiday it won’t be as large as a year ago.
While the overall global economy is expected to grow in the coming months, financial uncertainties in some European countries and concerns over China’s growth slowdown may affect Korea’s trade volume, the ministry said.
As the smartphone boom sweeps through Korea, it appears subscribers here use their devices in slightly different ways than their foreign counterparts.
According to a recent report by Universal McCann, a global media agency, 45 percent of smartphone users in Korea picked voice calling as the main use of their device, while data access came second at 42 percent.
This differs from smartphone users in other countries, where 49 percent of those surveyed chose data access as their smartphone’s main function. Voice calls were reported as the next most important function, with just 37 percent.
New York-based Universal McCann surveyed 8,000 smartphone users worldwide, 1,000 of them residing in Korea earlier this year.
According to the findings, accessing the Internet using a smartphone was also more popular among global smartphone users compared to Korean smartphone users.
“Mobile Internet preference and PC Internet penetration have an inverse relationship to each other. In this context, Korea shows a low mobile preference, because Internet access over a PC takes less time with a lower cost,” the report said. “We needed to know how and why consumers use their mobile devices the way they do.”
The government said yesterday that it would introduce measures to keep prices under control for some food products ahead of the Chuseok holidays later this month. It will also supply trillions of won in liquidity for small and medium enterprises to overcome liquidity shortages during the period.
The Ministry of Strategy and Finance said the government would try to increase the supply of various agricultural and fisheries goods to meet rising demand. “Overall consumer prices remain at manageable levels, but the costs of certain fuel, farm and fishery products have started to move up,” the ministry said.
Consumer prices traditionally go up ahead of Chuseok, which falls on Sept. 22 this year.
Although consumer prices rose 2.6 percent last month from a year ago, bad weather conditions caused food-related prices to jump sharply. Prices for fresh fish, fruits and vegetables jumped 8.9 percent in August from a year earlier and 2.8 percent from July. Garlic, radish and cabbage have seen significant price rises because of hot weather and frequent rains.
The government plans to keep close tabs on 21 types of farm and fishery products and release reserves held by the government. The Lee Myung-bak administration has recently promised to help low-income families to ease an income gap between rich and poor.
The ministry said 145,000 tons of garlic imported under the annual quota system will be sold on the market by October, while the government may move to lower adjustment duties on pollack that could make them cheaper. “The government plans to increase four-fold the supply of farm products compared to normal to help prevent sharp rise in prices,” the ministry said.
The government will make available 14.5 trillion won ($12.3 billion) worth of funds to cash-strapped SMEs that need to give bonuses to employees before the holidays.
International prices of major grains such as wheat, soybean and corn have soared since June, fanning fears of “agflation” and stoking concerns about our dependency on food from abroad.
The surge in prices is mainly tied to extreme droughts and record summer temperatures in the major grain-producing nations of Russia and the Ukraine, which have clamped down on exports. With the trend expected to continue the rest of the year, consumers could soon see higher prices for many food items.
On the supply side, global harvests are expected to fall in the near term because of extreme weather conditions.
On the other side of the equation, real demand - especially in emerging countries - and speculative demand are steadily climbing.
The average price for wheat in the second half of the year is expected to rise 35.7 percent compared with the first six months of 2010. Soybean prices are expected to increase 20.5 percent and corn by 17.1 percent. In the worst-case scenario, where grain supplies decline by a larger margin because of frequent climate calamities, prices for wheat, soybean and corn are expected to rise by 52.7 percent, 42.2 percent and 39.8 percent, respectively.
The Samsung Economic Research Institute (SERI) analyzed the effect of a price rise in imported grains on domestic consumer prices by using an industrial interdependence table for 2008. The results showed that a rise in the cost of grain imports could lift consumer prices in Korea by 0.27 percentage points in a base scenario and by 0.54 percentage points in the worst-case scenario (which represents a 10 percent drop). Since there is a lag time of about four to six months before international grain price increases work their way to grocery store shelves, we could see higher price increases in November. This undoubtedly will weigh down household budgets, which have already been hit by significant price increases for local fresh produce. Still, considering the current level of consumer prices, the summer surge in global grain prices likely will not lift consumer prices beyond the central bank’s inflation target of 2 percent to 4 percent.
Korea’s current food situation and import structure appear vulnerable to supply shortages and price fluctuations. Food and grain production are particularly weak. Korea, in fact, must import almost half of its food consumption. In 2008, the nation’s food and grain self-sufficiency rates reached record lows of 49.2 percent and 26.2 percent, respectively. Furthermore, if grain for livestock is included, our dependence on grain imports is higher.
As of 2008, Korea’s average grain self-sufficiency rate was 26.2 percent, ranking 28th among 31 countries in the Organization for Economic Cooperation and Development. Countries with a lower grain self-sufficiency rate than Korea’s include Japan, Portugal and the Netherlands. Even industrial countries produce more than their grain consumption. Slovakia, the Czech Republic, Sweden and Germany keep their grain self-sufficiency rates at 100 percent.
Adding to the vulnerability is Korea’s weak ability to secure grain shipments at its desired price because it purchases mostly through foreign grain marketers. About 73 percent of the nation’s major grain imports are from only global four companies and Japanese general trading firms. Since recent consumer inflation was tied to grain supply shortages, micro-economic measures (e.g., stabilizing supply shortages) would be more effective than macro-economic measures such as interest rate hikes.
In the mid to long-term, it is important to devise a measure to secure stable grain supplies, as grain prices will become more volatile with higher demand stemming from income growth in emerging countries and market shortages due to adverse weather. In the long run, the nation’s grain import structure should be revised to cushion shocks from grain shortages. Like energy and mineral resources, it is necessary to introduce specific targets for self-sufficiency and overseas dependency to better manage food resources. To improve our grain import structure, grain stocks should be increased through grain spot buying together with expansion of group and direct purchases of grain. Nurturing local grain trading companies is also necessary to reduce the risk of price fluctuations. Lastly, production per unit area should be increased by securing more agricultural land, developing high-yielding species and introducing new agricultural technology.
Office of Commercial Affairs, Royal Thai Embassy in Korea
Source : http://www.depthai.go.th