Manufacturing Production Grows 1.5% in Q1

The production capacity growth rate of manufacturing companies in Q1 fell to the 1 percent level for the first time since the Asian financial crisis.

The production capacity of manufacturing companies refers to maximum production volume that manufacturing companies can produce with their existing facilities and equipment.

According to the Bank of Korea and the National Statistics Office on Wednesday, the production capacity growth rate of manufacturers in Q1 increased a mere 1.5 percent year-on-year.

This is the lowest increase in 13 years and 3 months since the 1.3 percent rise in Q4 of 1993.

The rate continued to fall from 4.6 percent in Q1 of 2006 to 4.0 percent in Q2 to 3.2 percent in Q3 to 2.1 percent in Q4.

Real GDP increased by 30.9 percent from 2001 to 2006 while production capacity of manufacturing companies grew by only 22.7 percent. The production capacity growth rate in Q1 is much lower than the real GDP growth rate of 4 percent.

This indicates that the manufacturing sector can no longer lead Korea’s economy.

“Weaker future growth is likely as production capacity continues to decrease,” said experts.

legman@donga.com