South Korea factory output falls at fastest pace since May 2020 on auto chip shortage

By Joori Roh

SEOUL (Reuters) – South Korea’s factory output in October shrank at its sharpest pace in nearly 1-1/2 years, government data showed on Tuesday, as global chip shortages continued to weigh on car production.

Industrial output last month unexpectedly fell by a seasonally adjusted 3.0% month-on-month, Statistics Korea data showed, following a 1.1% decline in September and logging the biggest decline since May 2020.

That also missed the 0.4% growth tipped in a Reuters poll of analysts, by a large margin.

“Continued global supply chain disruption is one main factor behind the sluggish data,” Finance Minister Hong Nam-ki said, referring to the auto chip shortage.

A breakdown of data showed production of cars shrank 5.1%, while that of primary metal fell 5.9%.

“We expect better data in November, reflecting strong exports and a recovery in domestic demand and as the impact from high base fades,” Hong said.

On an annual basis, output grew 4.5%, sharply rebounding from a 1.8% contraction in September and beating 3.0% growth forecast in the poll.

Car production contracted 13.5% year-on-year, but that was offset by 38.7% growth in semiconductors output.

The global spread of Omicron coronavirus variant may further risk production going forward, with many countries closing their borders to prevent fresh outbreaks.

Meanwhile, Tuesday’s data also showed service sector output last month shrank 0.3% month-on-month, while retail sales grew 0.2%.

(Reporting by Joori Roh; Editing by Nick Zieminski and Sam Holmes)