SEOUL: South Korea posted its sharpest fall in industrial production since 2013. Statistics Korea said factory output dropped by 5.9 per cent in October from a year earlier, the biggest fall since a 8.3 per cent slump in February 2013.

The reading missed a 1.8 per cent decline forecast in a Reuters survey and follows a revised 8.5 per cent gain in September.

Output fell 1.1 per cent from September, missing a 0.2 per cent gain estimated in the survey.

The Bank of Korea (BOK), the central bank, raised interest rates for the first time in more than six years, yet tempered market expectations for more by raising concerns about the job market and other uncertainties.

The Bank of Korea’s Monetary Policy Board voted on Thursday to increase the benchmark rate to 1.50 per cent from a record-low of 1.25 per cent, ending a five-year easing cycle as a sustained export boom lifts economic growth.

“There is a recovery in factory activity, but October being a holiday shortened month led to a dip in output. Weaker car exports also dragged manufacturing output in October,” a Statistics Korea official said.

South Korea celebrated the Chuseok holiday from Oct.1 through Oct.9 this year unlike last year when the holiday fell in September, distorting production data. Although the recovery in industrial production has been uneven this year, a global chip boom driven up tech output, hoisting gross domestic product growth to the fastest in seven years.

Output barely grew from a month earlier in September but the revised data nonetheless marked the fastest annual jump in more than four years.

October car production fell 17.5 per cent from a year ago, while output of transportation equipment fell 37.7 per cent, driving the down manufacturing index.

Service sector output declined 1.7 per cent in seasonally adjusted terms on-month after a revised 1 per cent gain in September.

BOK board member Cho Dong-chul dissented in the 6-1 vote to raising interest rates to 1.50 per cent. His dissent, along with some dovish comments, pushed the won down by more than 1 per cent against the dollar to as weak as 1,090.2.

Governor Lee Ju-yeol declined to comment at a news conference when asked if he could give any guidance on the near-term direction of monetary policy, simply noting he would closely monitor growth and inflation to assess whether further hikes were needed.

Eighteen of 21 economists polled by Reuters had predicted the Bank of Korea would raise rates on Thursday, while the three others saw rates on hold at the current record-low 1.25 per cent.

Reuters