S.Korea Jan factory output far beats forecasts

SEOUL: South Korea's industrial output in January expanded by a much faster-than-expected 4.6 percent from December, data showed on Thursday, adding to signs of accelerating growth in Asia's fourth-largest economy.

The median forecast from a Reuters survey was for the industrial output index to rise a seasonally adjusted 1.0 percent in January from the previous month. It grew revised 3.1 percent in December from a month earlier.

Reuters poll forecasts: industrial output in January seen up a seasonally adjusted 1.0 percent from December and up 12.1 percent from a year earlier.

January industrial output growth sets the fastest monthly rise since September 2009.

January composite leading indicator's annual growth quickens from the previous month for the first time since December 2009.

January average factory operation rate of 84.8 percent is the highest on record.

January capital investment index rise of a seasonally adjusted 4.5 percent from December marks the fastest monthly gain since May last year.

A finance ministry official said the economy was recovering faster than expected from a slowdown seen late last year but that February's activity could be negatively impacted by an unfavourable external situation. The official declined to be named.

GEORGE WORTHINGTON, ECONOMIST, IFR MARKETS (A UNIT OF THOMSON REUTERS), SYDNEY:

"Coming on the back of the latest rise in consumer prices, the data adds to the already strong case for another rate hike when the Bank of Korea meets next Thursday. IFR expects a 25 bp hike to 3.00 percent, but more needs to be done given increasing signs that price pressures are becoming more widespread in the economy. The central bank's policy rate was 5.25 percent just prior to the crisis; the current 2.75 percent is far too low for an economy racing along with little spare capacity."

KIM HYO-JIN, ECONOMIST, DONGBU SECURITIES:

"The high consumer price index growth released yesterday and today's strong output data add to the likelihood of an interest rate rise. But considering external uncertainties, the central bank may need to wait and see for one more month.

"The composite leading index's rebound and inventory cycle indicator signal that factory production will enter an expansionary stage from the second quarter. But rising oil prices could lead to weak demand. Therefore monetary policy will not work unless the pace of oil price rises is contained."

NA JUNG HYUK, SENIOR RESEARCH ANALYST, DAISHIN SECURITIES:

"Today's strong results will not affect the central bank's rate decision next week. The data is good but the market had already expected it."

"The disturbance in Libya will definitely affect the central bank's decision. It will consider the risks and also recent domestic price hikes."

"We had expected the South Korean economy to rebound early this year. However, due to the unexpected turmoil in Libya, output activity could slow."

KIM JIN-SEONG, ECONOMIST, HANWHA SECURITIES:

"The data came out solid. There's a chance the Bank of Korea will raise rates this month, but I think they will be very cautious about it. Rising inflation is more due to problems and disruptions in supply, rather than strong demand. Consumer sentiment is far from strong."