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(LEAD) S. Korea's industrial output grows 11 pct in Sept.

All Headlines 14:32 October 30, 2009

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SEOUL, Oct. 30 (Yonhap) -- South Korea's industrial output grew for a third straight month in September, adding to optimism that the nation's economy is fast pulling out of a steep downturn caused by the financial turmoil last year, a government report showed Friday.

According to the report by the National Statistical Office (NSO), production in the mining and manufacturing sectors expanded 11 percent last month from a year earlier, accelerating from 0.7 percent and 1.1 percent advances in July and August, respectively. This marked the highest expansion since January last year when output grew 11.7 percent.

The September figure is better than a median estimate of a 7.8 percent advance in a poll conducted by Yonhap Infomax, the financial news arm of Yonhap News Agency. Production also rose 5.4 percent from a month earlier, the report showed.

"The increased production was mostly driven by robust activities in semiconductor and car industries thanks to tax incentives and other stimulus measures pushed by the government," Yun Myung-joon, director of the NSO's short-term industry statistics division, told a press conference.

"Based on the figures, we can say that the economy is returning to normal after reaching its lowest point, though a rebound in production is not evident across the board," he added.

Industrial output has been growing since it turned positive in July for the first time in 10 months, bouncing back from a steep contraction last year when the global financial markets and economy were hurled into chaos by the collapse of Lehman Brothers.

Financial markets tumbled and consumer and business sentiment rapidly froze amid fears that the nation's export-driven economy would stutter for longer than many other nations.

Optimism, however, is growing that the Korean economy is fast pulling out of the downturn with exports and domestic demand picking up. Stocks and currency markets are also stabilizing thanks to the return of foreign funds.

According to the Bank of Korea, the country's gross domestic product expanded 2.9 percent during the third quarter from three months earlier on improving domestic demand and robust exports. This marked the fastest advance in over seven years. The latest GDP figure is the third straight quarter of economic growth after having fallen 5.1 percent in the final three months of 2008.

Finance Minister Yoon Jeung-hyun cautiously predicted that the nation could avoid the first contraction in more than a decade this year given the better-than-expected growth data. But he added that the government will stick to its expansionary policy stance until the economy is making a firm recovery.

The latest output data supports the upbeat mood, indicating that local companies might turn positive about the economy, ramping up production on expectations demand for their products will increase down the road.

According to the report, companies expanded investment with spending on their facilities jumping 5.8 percent last month from a year earlier, a sharp turnaround from the previous month's 15.5 percent on-year contraction. The nation's average factory operation ratio rose to 80.2 percent from the previous month's 77.7 percent, the first in 15 months that the figure stayed above the 80-percent level.

Consumer goods sales also grew 6.7 percent on brisk demand for cars, clothes and durable goods. This marked the fifth straight month of on-year expansion, according to the report.


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