SEOUL, Feb. 11 (Korea Bizwire) — Inventory of South Korean manufacturers has increased to its highest point in 10 years, data showed Monday, a likely sign of a dulled economy.
Figures obtained from the Korea Center for International Finance and Statistics Korea put the inventory-to-sales ratio in December last year at 116 percent. The number is the highest since 122.9 percent in September 1998, when the country was struggling with the Asia-wide foreign exchange crisis.
The ratio has been on the incline from late last year. After reaching 106.9 percent in October, it climbed to 111.7 percent in November.
Inventories sometimes rise during an economic boom, when manufacturers stock up for large shipments, such as semiconductors. Normally, however, a higher ratio signals a slowdown, as companies are unable to sell their products due to sluggish demand.
Factory operational rate was 72.7 percent in December, the lowest in eight months.
The auto and chips industries, the two conventional leaders in the manufacturing sector, both showed higher inventory rates. Shipments for carmakers shrank 7.1 percent in December compared to the previous month while the inventory ratio rose 6.5 percent.
In semiconductors, shipments fell 5.1 percent but the in-stock ratio increased 3.2 percent.
“The economic lull appears to have been partially reflected in the recent increase in the inventory ratio,” an official from the Bank of Korea (BOK) said. “There is also likely an effect from faltering global trade, due to U.S.-China trade conflict.”
Foreign investment banks, like Nomura and Goldman Sachs, predicted contractions in manufacturing from growing warehouse stock, worsening corporate sentiment and shaky exports.
“Economic conditions for semiconductors are expected to recover in the latter half of this year, and there is no reason to be pessimistic about the U.S.-China trade war,” the BOK official said.