By Joori Roh

SEOUL (Reuters – South Korea’s October factory production fell at the sharpest rate in almost 1-1/2 years. This was due to global chip shortages that continued to impact car production.

Statistics Korea data revealed that industrial output unexpectedly dropped by 3.0% month on month, adjusting for seasonal factors. This follows a 0.1% drop in September, and the largest decline since May 2020.

This also misses the 0.4% increase tipped by Reuters analysts, but it is still a significant margin.

Hong Nam-ki, Finance Minister, stated that “continued global supply disruptions are one major factor behind the sluggish dataset.” He was referring to the shortage of auto chips.

The data breakdown showed that production of cars fell by 5.1% and primary metal declined by 5.9%.

Hong stated that he expected better data for November due to strong exports, a rebound in domestic demand, and the diminishing impact of high base.

Annually, production grew by 4.5%. This is a sharp rebound from September’s 1.8% contraction and beats the 3.0% forecasted in the poll.

The year ended with a decline in car production of 13.5%, offset by a 38.7% increase in the output of semiconductors.

Omicron coronavirus variant spreads globally, increasing the risk of production. Many countries have closed their borders in an effort to stop new outbreaks.

Tuesday’s data showed that service sector output decreased 0.3% last month, while retail sales increased 0.2%.