NewKorea factory output slumps in May on poor export demand

South Korea's industrial output declined sharply in May, with production losses across the key vehicle, semiconductor and machinery sectors adding to signs that economic growth may have slowed in the second quarter.

Hit by a deadly respiratory virus and weak global demand, industrial output in Asia's fourth-largest economy dropped a seasonally adjusted 1.3 per cent in May from April, the third monthly decline.

Yesterday's gloomy data follows a downwardly revised 1.3 per cent fall in April output and analysts expect further weakness as domestic consumption was hit hard last month by the spread of Middle East respiratory syndrome (Mers).

"Exports may improve in June but domestic consumption was hurt by Mers; we can expect improvement in production from July when the effects of rate cuts start contributing," said Huh Jae-hwan, an economist at Daewoo Securities.

The rapid loss of momentum prompted the country's central bank to cut interest rates for the second time this year, and the government is to deliver extra fiscal stimulus worth more than US$13 billion via a supplementary budget.

South Korean Finance Minister Choi Kyung-hwan said last week he was concerned second-quarter growth would be below 1 per cent quarter on quarter, and that low growth would continue in the long-term.