**Additional data information added**
SEOUL, Mar 04 (AJP) - South Korea’s factory output turned negative for the first time in three months in January on slower semiconductor and construction activity, underlining the fragility of the economic recovery as the year-end base effect faded.
Mining and manufacturing output fell 1.3 percent in January from the previous month — the first decline since October, according to data released by the Ministry of Statistics and Data Wednesday.
The downturn was driven largely by shipbuilding and semiconductor production.
Output from “other transport equipment,” which includes tankers and container ships, shrank 17.8 percent from a month earlier.
Semiconductors — a linchpin of the Korean economy — saw production fall 4.4 percent from the previous month and 5.2 percent from a year earlier.
Reflecting the slowdown, the average capacity utilization rate for manufacturers slipped 1.4 percentage points to 71.2 percent, while inventories rose 0.2 percent during the same period. Mining and manufacturing shipments also decreased 1.4 percent from the previous month.
“The growth trajectory for high-value-added products, such as High Bandwidth Memory (HBM), remains robust,” said Lee Doo-won, director general for economic trend statistics, noting that the pace of semiconductor production growth had already begun to slow since September.
Domestic machinery orders edged down 0.1 percent from a year earlier. While private-sector orders rose 4.1 percent, a 53.1 percent plunge in public-sector orders — following a massive 93.2 percent surge the previous month — dragged down the overall figure.
“The decline in public machinery orders in January indicates that new large-scale social overhead capital (SOC) projects have entered a lull,” Lee said.
The construction sector also swung sharply lower as the year-end spending boost evaporated. Construction investment, which had jumped 12.1 percent in December, plunged 11.3 percent in January, erasing the earlier gains.
“A strong base effect was at play following the push-out style of construction completions in December, as both the public and private sectors rushed to exhaust year-end budgets,” Lee added.
Despite the current slump, the outlook for construction showed tentative improvement, with total orders rising 35.8 percent from a year earlier. Building orders increased 24.1 percent, while civil engineering orders — including railways — surged 70.5 percent.
Still, Lee struck a cautious note, warning that first-quarter performance warrants close monitoring as the January decline came in sharper than expected.
A split economic outlook
Facility investment provided a bright spot – at least for now, rebounding 6.8 percent from the previous month.
The recovery was led by a 41.1 percent surge in semiconductor manufacturing equipment and a 16 percent increase in automotive investment, fueled by a wave of corporate vehicle replacements at the start of the year.
While the spillover of export strength into facility investment is a positive signal, the ministry remained cautious.
“Uncertainty remains high regarding when the construction sector — which still faces a thin order backlog — will bottom out and rebound,” the ministry said.
Economic indicators also showed a notable divergence between current conditions and future expectations.
The cyclical component of the coincident composite index, which measures the present economic climate, remained unchanged at 99. In contrast, the cyclical component of the leading composite index — a gauge of future trends — rose 0.7 points to 102.3.
A reading of 100 marks the threshold between expansion and contraction. The gap suggests that while optimism about a future recovery is building, the immediate reality remains challenging.
“The leading index rose due to a sharp increase in exports, but it is still difficult to say the economy has fully recovered,” the ministry said, pointing to the disconnect between the two indicators.
Korea’s exports in January surged 33.9 percent from a year earlier to $65.85 billion, while the monthly trade balance recorded a surplus of $8.7 billion — the 12th consecutive month in the black, according to the Ministry of Trade, Industry and Energy.
However, retail sales for food and other non-durable goods — a barometer of household sentiment — plunged 5.4 percent year on year, far steeper than the 0.5 percent decline recorded the previous month.
By sector, sales at supermarkets and convenience stores fell 13.8 percent, while those at large hypermarkets tumbled 20.1 percent, reflecting tightening household spending.
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