South Korea factory output grows at fastest annual rate in four years

Seoul (Reuters): South Korea’s September factory output barely grew from a month earlier but nonetheless notched the fastest annual jump in more than four years, Statistics Korea said on Tuesday.

Factory output blew past a 4.7% forecast and soared 8.4% from a year earlier on what a Statistics Korea official said was a base-year effect.

Output only rose a seasonally adjusted 0.1% from August, far below the 2.4% seen in a Reuters poll.

“September being a holiday-shortened month in 2016 is the main reason for the surge in on-year terms,” the Statistics Korea official said. “While output barely grew from August, the production base is much higher now compared to the same time last year. Output has been gradually expanding as manufacturing of semi-conductor chips is in a super-cycle.”

A so-called global “super-cycle” in memory chips has been a particular boon for the South Korean economy which is geared toward hi-tech exports, with gross domestic product rising over the July-September period at its fastest rate in seven years.

The chip boom helped Samsung Electronics to book a record operating profit in the third quarter as tight supply and strong demand for semi-conductors drove up revenue.

Tuesday’s report showed output of semi-conductors jumped 13.4% in September from a year earlier after rising for most of this year, boosting output figures especially in on-year terms.

Production of cars soared 27.1% from a year earlier on base-year effects.

In September 2016 factory output fell 2% from a year earlier on a fewer working days because of the Chuseok holiday and as Hyundai Motor experienced its first full strike in 12 years, disrupting production.

This year, South Korea celebrated the annual Chuseok holiday from Oct 2 through Oct 9.

In an encouraging sign that the recovery is becoming more balanced and broad-based, services output grew 1.3% in September and marked the fastest growth since July 2015 thanks to a brisk retail sector.

Service sector data suggested private consumption picked up in September, supporting the stellar third-quarter growth reading published last week.

“Service sector output saw a big jump, so it could see some adjustments in the coming months, but it will continue to expand on improving domestic demand,” the Statistics Korea official said.

A separate report from the Bank of Korea on Tuesday showed business sentiment for November jumped to a near six-year high as an improved economic outlook and strong exports boosted overall confidence.