Korea’s industrial output shrank on-year for the first time in 31 months in January as its export-driven economy is under growing pressure from persistent global market uncertainties, a government report showed Wednesday.

According to the report by Statistics Korea, production in the mining and manufacturing industries contracted 2 percent last month from a year earlier, compared with a 2.8 percent gain in December.

This marked the first contraction since June 2009 when the output inched down 0.6 percent.

Industrial production, however, rose 3.3 percent on-month in January after shrinking 0.7 percent in December, the report said.

The country’s service sector output expanded a mild 0.9 percent on-year last month, with the average operating rate of manufacturers standing at 80.6 percent, a gain of 3.6 percentage points from the month before.

“The output shrank in part due to falling production of automobiles and audio-video and communications equipment, which dropped 6.9 percent and 11.2 percent over the cited period,” the agency said.

The shrinkage came as cloudy external trade conditions and prolonged eurozone debt problems are taking a toll on South Korea’s exports.

South Korea’s exports declined 7 percent on-year to $41.4 billion in January with shipments to the eurozone region dropping 37.9 percent on-year.

The country posted a current account deficit for the first time in two years in January. The deficit reached $770 million last month, shifting from a surplus of $2.81 billion the previous month, according to the central bank.

Domestic demand was not helping boost output either as rising oil prices seem to be putting a damper on consumption, analysts said.

Retail sales inched up 0.8 percent on-year in January, but on-month growth slowed to 0.8 percent from the previous month’s 2 percent gain, the report showed.

Dubai crude oil closed at $121.81 per barrel on Tuesday. High oil prices are weighing on South Korea, which depends on imports for almost all of its energy needs.

The central bank earlier kept its key interest rate unchanged for the eighth straight month in February as an increased uncertainty in inflation outlook and an economic slowdown continue to challenge the domestic economy.

Analysts said that the industrial output figure last month indicated that the economy is losing its momentum in the face of toughening market conditions at home and abroad.

“South Korea’s economy seems to be losing its momentum both on export and domestic demand fronts,” said Suh Dae-il, an analyst at Daewoo Securities Co.

“Given the country’s heavy reliance on exports, unfavorable market conditions in Europe and rising oil prices, it seems that the industrial output growth will likely stay sluggish at least during the first quarter of this year,” he added. 

(Yonhap News)