(Updates with economists' views, more data)
By Choonsik Yoo
SEOUL, March 31 (Reuters) - South Korea's factory output
slumped while retail sales jumped in February, data showed on
Friday, signalling an uneven economic recovery and bolstering
the market's view that the central bank will keep rates on hold
for the rest of the year.
The industrial output index fell 3.2% in February from the
month before after a 2.4% gain in January, while the retail
sales index jumped 5.3% month-on-month after a 1.1% drop in
January, according to Statistics Korea.
"The figures were extremely volatile in both January and
February, but overall, the economy appears to be holding firm
and could avert contraction during this quarter," said Oh
Suk-tae, economist at Societe General Securities in Seoul.
"Still, I don't think the situation is improving so much as
to change our view that the Bank of Korea's tightening cycle is
over," he added.
South Korea's central bank, which started raising interest
rates in August 2021 ahead of most central banks, has raised the
policy rate by 300 basis points from just 0.5% but kept it
unchanged at its latest meeting in February.
Bank of Korea Governor Rhee Chang-yong told reporters after
the February decision that the central bank would not resume its
rate hikes if inflation continued to moderate.
The sluggish factory output reading for February was led by
semiconductors and automobiles, with production dropping 17.1%
and 4.8%, respectively, more than offsetting gains in chemicals
and industrial machinery, the data showed.
Economists said the robust retail sales data could be
temporary given the worsening outlook for exports, which
influence a wide range of economic activity in South Korea.
The country's exports, which rely heavily on demand from
China as well as global demand for semiconductors, are forecast
to suffer their worst decline in nearly three years in March,
according to a Reuters poll of economists.
(Reporting by Choonsik Yoo; Editing by Shri Navaratnam,
Jacqueline Wong and Edmund Klamann)
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