Equipment Investment, 7.5% Decrease

Owing to influences of World Cup and local election, the production increase sharply slowed down and the equipment investment decreased in June. Also, for the first half of the year, a balance of traveling showed the largest deficits, and the black on the balance of current account decreased to the half level of the same period of the last year.

▽ Hesitating increase of industrial production 〓 According to ‘Trend of industrial activities in June’ reported by Korea National Statistical Office on July 30, Industrial Production and the shipment increased just by 5.4% and 2.2% over the same month of the last year. Industrial production in semiconductors increased by 36%, but the production on motorcar decreased by 20.1% owing to the influences of a partial strike of Hyudai Motor and Kia Motors. So, its growth largely decreased compared with 7.4% of April and 7.7% of May. The growth rate of shipment is 2.2%, lowest rate since last October (-0.9%).

The equipment investments decreased by 7.5% focused on the computer and motorcar, and it turned to a minus after 4 months from February (-0.6%). The average operation rate was 73.4% and showed a downward curve for 2 months after April (77.7%). Inventory sales ratio rose to 72.8%, increased by 5.6% over the last month.

Kim Min-gyeong, the head of Economic Statistic Bureau, Korea National Statistical Office said “Operated days of June reduced by 1.1 days over the last June and by 2 days over May due to the local election and World Cup, and all indices have become worse owing to a labor dispute in a field of motorcar. However, it is a temporary decrease of business rising tendency because the index aggravation is caused by irregular variables.”

▽ The balance of Current Account, deficit for the next year 〓According to ‘Trend of the balance of international payments for June’ published by Bank of Korea (BOK) on July 30, the traveling balance deficits was USD 378 million and so increased largely after July 1997 (USD 401 million).

The traveling balance of the first half of the year showed the deficits of USD 1,638 million and its deficits increased 14.6 times over the same period of the last year (USD 112 million). It was the largest figures after 1980 since BOK started the calculation of traveling balances. Accordingly, the service balances of the first half of the year showed the deficits of USD 2,931 million. The deficits increased 3.4 times over the same period of the last year.

The current balance of the first half of the year showed the black of USD 3,570 owing to the black of the product balance, but decreased to the half the one of the same period of the last year (USD 6,530 million).

Park Cheol, the vice-governor of The Bank of Korea was worried saying, “When the traveling balance becomes worse continuously, the current balance may be turned to the deficit for the next year.”

Joong-Hyun Park sanjuck@donga.com