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South Korea's Industrial Output, Retail Sales Weaken in April as Iran War Disrupts Supply Chains

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South Korea's Industrial Output, Retail Sales Weaken in April as Iran War Disrupts Supply Chains

South Korea's industrial output and retail sales weakened in April amid global supply disruptions and elevated fuel costs stemming from the US-Iran conflict.

Industrial production slipped 0.6% from the previous month, according to data released Friday by the Ministry of Data and Statistics.

Mining and manufacturing output slid 0.7%, while construction fell 1.4%. The service sector also declined 1%, with finance and insurance dropping 7.7%. The information and telecommunications segment bucked the trend, rising 4.3%.

Within manufacturing, semiconductor output rose 3.1%. Automobile production, however, fell 10%, and petroleum output plunged 19.4%, the steepest drop in decades, reflecting supply disruptions tied to the US-Iran conflict.

The finance ministry, in a separate statement, attributed part of the decline to production disruptions caused by a fire at an auto parts supplier.

On a year-over-year basis, industrial output rose 2.4%, softer than the 3.7% increase in March.

Despite the weak April figures, the ministry expects industrial activity to rebound in May, citing a recovery in consumer sentiment and a business sentiment index that reached its highest level in 43 months.

"It appears the figures were affected both by a base effect following gains in February and March and by the Middle East war," Lee Doo-won, a senior official at the data ministry, was quoted by The Korea Herald as saying.

Meanwhile, retail sales contracted 3.6% from the prior month but rose 1.6% year on year. Sales of semi-durable goods were flat, while durable goods, including telecommunications equipment and computers, slumped 11.1%. Non-durable goods such as fuel edged down 1.1%.

The government said it will continue fuel price relief measures and other steps to minimize the economic fallout from the conflict.

The outlook for this year's economy was also revised upward, with the Bank of Korea raising its growth forecast to 2.6% from 2% and the Korea Development Institute lifting its projection to 2.5% from 1.9%.

The BoK held its benchmark interest rate at 2.5% amid ongoing uncertainties surrounding the war, but signaled a more hawkish stance later in the year.

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