South Korea’s industrial production likely shrank in August on decline in auto production

South Korean industrial production is likely to have shrunk in August because of an auto factory strike, following a recovery in July. The expected rise in the year-on-year growth might reflect the difference in working days. Robust performances in export in August with a positive year-on-year growth are not expected to be mirrored by solid industrial production as the strength in export was partly due to favorable base effects and the usual fluctuations in the shipbuilding sector, according to Societe Generale.

The drop in auto production is likely to be the main driver of the industrial production contraction. The decline in auto production was because of labor strike action that impacted all the important factories. Auto production is expected to decline 23.1 percent sequentially, bringing overall industrial production by 2.7 percentage points, noted Societe Generale.

Other important sectors such as electronics and chemical and metal products are likely to have been quite resilient, showed export data. There might be an instant improvement in industrial production in September as auto production normalizes after the strike. However, underlying momentum in industrial production still seems to be shaky due to the sustained underperformance in global trade, added Societe Generale.