South Korea: Industrial Production Improves a Bit; Exports in Won Rise, but in USD, Fall

Industrial production in South Korea increased 1.35% in January, the first increase in four months. However, compared to a year ago, the unadjusted index is down some 25%. Production of motor vehicles continues to be the biggest drag with production down more than 10% in January and down over 40% from a year ago. Production in Electronic equipment and devices increased 22% in January, but was still 32% below the year ago figure. Production in the Pharmaceuticals, medical chemicals and botanical products industry was up only 2.5% in January, but production in this industry has held relatively steady and, although only 4% above January 2007,it is one of the few industries where production is greater than a year ago. These four indexes are shown in the first chart.

Data on international trade in goods in US dollars and Korean won were released yesterday. The Bank of Korea publishes balance of payments data in USD and much of the discussion of Korea's trade takes place in USD terms. However, for domestic considerations the won data may be more relevant. The two series can differ significantly when there is a substantial appreciation or depreciation in the won. For example, in February seasonally unadjusted data on exports in USD show a year to year decline of 17%, while the seasonally unadjusted data in won show and increase of 26%. The difference is due to the change that has taken place in the won over the year. As can be seen in the third chart which shows the won versus the USD on an inverted scale, the won has depreciated substantially over the past year. As a result, the increase in exports in yen, when converted to USD, turn into a decline. Recent data are shown in the table below.