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South Korea's industrial output surged at the fastest rate for more than six years in February over January, Statistics Korea data showed on Thursday, as demand for smartphones and cars drove factory activity. Output rose by a seasonally adjusted 3.3 percent in February on monthly terms, following a downwardly revised 2.1 percent fall in January. The initial reading for January was down 1.8 percent.
February's growth rate was the fastest since a 3.7 percent gain in September 2009 and far outperformed a median 0.2 percent decline tipped in a Reuters survey of 12 analysts. Factory data tends to be volatile, even after adjustment for seasonal factors. "I think industrial output has finally hit bottom and is now coming up. I don't see any huge issues through end-Q2 but recovery in consumption will be key going forward," said Park Jung-woo, an economist at Korea Investment & Securities.
"In the short term, we may see many market expectations for a rate cut in April or May die down." The data showed semiconductor production jumped 19.6 percent in February from a month ago while sales of durable goods, including cars had risen 3.6 percent over the same period. Tech giant Samsung Electronics Co Ltd recently launched its new flagship Galaxy S7 smartphones, for which it saw pre-orders surge.
Car sales were helped by a tax cut revived by the government early this year aiming to boost consumption. A finance ministry official said the data for March was expected to be even better as the decline in exports is expected to have eased somewhat and investment will likely pick up. Adding to the optimism, a survey published earlier in the day showed business sentiment ticked up for the first time in five months, although overall sentiment still remained gloomy.

Copyright Reuters, 2016

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