South Korea chip output boosts factory production in December

South Korea’s factory output in December higher than estimated as a large chip production boosted industrial activity. However, analysts warn of the impact of the Coronavirus outbreak on demand in January.

Industrial output climbed 3.5% in December compared to a month earlier, its quickest gain since November 2016.

Recent economic indicators such as the trade data in December showed signs of recovery in South Korea. Production increased by 4.2% compared to a year earlier, the fastest gain since October 2018.

Memory chips output climbed 33.8%. Production for machine and transportation equipment jumped 15.7% and 9.4%, respectively.

December facility investment rose 10.9% compared to the previous month and gained 11.1% year-on-year due to higher demands.

“Today’s bullish data was mainly helped by improvement in facility investment as global uncertainties eased on the ‘Phase 1’ trade deal between the United States and China, as well as the policy mix of the government’s expansionary fiscal policy and the Bank of Korea’s easing monetary policy,” said Ha Keon-hyeong, economist at Shinhan Investment Corp.

In 2019, industrial output decreased by 0.7%, the lowest since the 6.4% drop in 1998. The average rate of factory operation was 72.9%, the worst since the Asian financial crisis.

“Due to the economic slowdown last year, restructuring in firms and decreased productivity pulled down the average operation rate,” an official from Statistics Korea said.

Economists worry that the spreading virus from China could greatly impact South Korea’s fragile economy.