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South Korea Dec output jumps but seen moderating
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South Korea Dec output jumps but seen moderating
Reuters - Friday, January 29
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* Dec industrial output +3.5 pct m/m (Reuters poll: +1.3 pct)
* Outlook indicator suggests recovery will moderate
* Markets ignore data and follows global markets
By Cheon Jong-woo
SEOUL, Jan 29 - South Korean industrial output in December rose nearly three times as fast as expected but an outlook indicator suggested the pace would moderate, adding to concerns about the fallout from monetary tightening in China.
The industrial output index in December rose a seasonally adjusted 3.5 percent from November, far above the median forecast for a gain of 1.3 percent and a revised 1.5 percent rise in November, government data showed on Friday.
Figures on domestic demand also posted solid growth in December but a reduced pace of growth in the statistics agency's official leading indicator suggested industrial activity would lose some of the momentum in the coming months.
Markets shrugged off the data since they had already absorbed fourth-quarter growth figures earlier this week, which were also below expectations.
"Factory utilisation rates were high and local consumption rose in December, but it will be difficult for that kind of strength to continue beyond the first quarter," said Lee Sung-kwon, chief economist at Shinhan Investment Corp.
The composite leading indicator grew a strong 12.8 percent in December from a year earlier after a 12.6 percent gain in November, but the monthly rise of 0.2 percentage point was a drop from a 1.3 percentage point rise set in November.
"The positive momentum in the domestic economy is ongoing but the pace has been weakening, given that the rate of gains in the leading indicator dropped," said June Park, economist at Woori Investment & Securities.
Although analysts play down the direct impact on South Korean exports from China's move to rein in bank lending, global commodities prices have come under pressure recently on concerns about a possible slowdown in the giant economy.
Front-month futures on three-year treasury bonds <KTBc1> jumped 21 ticks, while the stock market <.KS11> shed 2.4 percent as concerns about the fallout from monetary tightening in several countries dampened risk appetite among global investors.
Analysts said the industrial activity data did little to change their view that the central bank will hold interest rates at the record-low level until it feel convinced that the economic recovery is on a firm footing.
The Bank of Korea said on Tuesday the economy expanded by a seasonally adjusted 0.2 percent in the fourth quarter of last year from the previous three months, below market expectations for a 0.5 percent rise. [ID:nTOE60O00L]
The weaker-than-expected reading persuaded investors and analysts to scale back their bets on the Bank of Korea raising rates during the first half of the year.
The central bank held the 7-day repurchase agreement rate <KROCRT=ECI> steady at record-low 2.0 percent for the past 11 months after slashing it by a total of 325 basis points in several months. It next reviews the rate on Feb. 11.
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