Leading Indicator Drops for First Time in 13 Months

By Yoon Ja-young
Staff Reporter

The economy's recovery is showing increasing signs of losing steam. Leading indicators, which gauge the economic outlook, fell for the first time in 13 months.

According to Statistics Korea, industrial output rose by 36.9 percent in January from a year ago, marking a year-on-year rise for seven consecutive months.

However, the year-on-year leading indicator marked 11.3 percent in January, down 0.3 percentage points from December. It is the first time for the index to head downward in over a year.

It had been rising since January 2009, but has been losing its pace of growth.

"The fall of the leading indicator may be raising the question of whether the economy will continue its recovery. It will add to uncertainties in the financial market," said Kim Yoo-mi, an economist at KTB Investment & Securities.

She expected the indicator to fall further, as consumer sentiment, the stock market and liquidity all work toward the negative side.

"The industrial output will continue expansion on exports for some time, but it will slow down growth. Facility investment will also slow down, and construction investment is expected to lose momentum," she said.

A number of indices have shown recently that the economic recovery may be slowing, amid renewing troubles in the global financial markets and the diminishing effect of the government's stimulus package.

Consumer confidence fell to a seven-month low in February, and the consumer sentiment index, which measures the overall economic outlook, current living conditions and future spending, dropped to 111 from 113 in January.

The country's trade balance went into the red in January for the first time in 12 months, marking a $460 million deficit, and the unemployment rate rose to 4.8 percent in January from 3.6 percent the previous month.

The number of jobless reached 1.21 million, the highest number since February 2000.

"The economy is not essentially bad. Exports are still OK, especially to China. The indices are slowing down as they jumped steeply last year after the global financial crisis," said Jun Min-kyu, an economist at Korea Investment & Securities.

However, he said that the slowing down of the rebound in indices can have a negative psychological effect.

Another financial expert showed concern that the economy could change direction anytime exports start to slow down growth, coupled with problems in the job market.

chizpizza@koreatimes.co.kr