South Korean manufacturers cut inventories at the second-fastest pace since 1998 in January and idled the most production in three decades in the latest signs of their increasing anxiety about global demand. Factories left almost 40 percent of production dormant in January and a sharp fall in imports in February trade figures, led by production equipment and materials, underlined their doubts that demand would pick up.
Like other Asian exporters, South Korea has been hit hard by the slump in global demand and it posted a record fall in goods sold abroad in January. "The decline in inventories is the result of companies having stopped production and relying on existing inventories - another sign that we are truly in the middle of a severe downturn," said Lee Sung-kwon, economist at Goodmorning Shinhan Securities.
"We expect output to decline even more over the coming months. A bottom could be reached at the end of the first half or in the third quarter," he said. Analysts said manufacturers would not start restocking their depleted inventories until they become confident the global economy is turning around and that could be months away at best.
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