S Korea factory output rebounds in June on chip, car production boost

SEOUL -South Korea's factory output in June rebounded from May, supported by a boost in semiconductor and car production, underpinning hopes for a recovery in the manufacturing-heavy economy.

Industrial production grew by a seasonally adjusted 2.2per cent in June from a month earlier, Statistics Korea data showed on Friday, rebounding from a 1.0per cent contraction in May and beating a 1.0per cent gain forecast in a Reuters survey of 17 economists.

Breakdown of data showed production of semiconductors, the nation's key exporting item, rose 8.6per cent on a month-on-month basis, while that of cars was also up 6.4per cent.

"The strength in the semiconductor sector should be the main driver of the jump in industrial production in June," said Oh Suk-tae, economist at Societe Generale. "Industry data showed that auto production recovered from the dip in May, suggesting that auto factories succeeded in resolving their semiconductor shortage problems."

On a yearly basis, factory output surged 11.9per cent, also beating a forecast of 9.3per cent rise tipped in a Reuters survey and following a 14.9per cent rise in May when it posted the fastest growth since February 2012.

That extended annual growth to eight consecutive months.

Friday's data also showed service sector output in June rose a seasonally adjusted 1.6per cent from a month earlier, while retail sales rose 1.4per cent.

But the country is currently battling its worst-ever outbreak of coronavirus, which could take a toll on its economic recovery.

"A jump in June industrial production that would instantly recoup the losses in the previous three months may brighten the near-term growth outlook, though (domestic) consumption will be hurt by the current COVID-19 wave," Oh said.

South Korea reported record daily infections this week, even after it imposed the toughest social distancing rules in the metropolitan Seoul area and some of its neighbouring regions, while only 13.7per cent of the country's 52 million people are fully vaccinated.

(Reporting by Joori Roh; Editing by Himani Sarkar and Christopher Cushing)