South Korea June industrial output slips, sluggishness seen ahead

SEOUL (Reuters) - South Korea's industrial output in June missed expectations to fall slightly, government data showed on Friday, and exports are seen as unlikely to rebound from their current record falling streak - the longest on record.

Industrial output fell by a seasonally adjusted 0.2 percent in June from May, lagging a median 0.2 percent gain forecast in a Reuters survey of analysts and sagged far below a revised 2.5 percent rise in May.

On an annual basis, industrial output rose 0.8 percent in June after a revised 4.7 percent gain in May, outperforming a median 0.5 percent incline tipped in the same survey.

May figures were strong because of a one-off base effect due to a Middle East respiratory syndrome outbreak in May 2015.

A finance ministry official's comments suggested that in government circles the fall may have been expected.

"While the fall was smaller than what we had in mind, the figure relied heavily on semiconductors when most other industries struggled," a finance ministry official said, adding that factory output for July may be weak.

Stephen Lee, an analyst at Samsung Securities, believes rate cuts are in play for September or October as exports may fall further in the next few months.

"Not immediately in their August meeting, but (the Bank of Korea) could wait another month and take action in September or October," he said.

The central bank's monetary policy board will next meet on Aug. 11 to review its policy rate, currently at a record low of 1.25 percent.

For Huh Jae-whan, economist at Mirae Asset Daewoo Securities, falling industrial output and exports add to pressure on the Bank of Korea to cut."We feel it will be difficult for exports to recover in earnest by year-end and this, in addition to the ongoing corporate restructuring, will pressure the central bank to cut rates again," he said.

Output of semiconductors jumped 11.1 percent from a month earlier, while production of automobiles and transportation equipment fell 2.5 percent and 6.1 percent respectively.

Service sector output rose by 1 percent in seasonally adjusted terms in June on-month, posting the fastest jump since December and saving the overall output figure from falling further.

A combination of uncertainties including Brexit and South Korea's ongoing corporate restructuring at home spelled trouble for South Korea's growth in the months ahead, the finance ministry said in a statement following the factory output report.

Factory utilisation fell 1.3 percent in June from a month earlier after rising 2.4 percent in May.

(Reporting by Christine Kim and Cynthia Kim; Additional reporting by Dahee Kim; Editing by Eric Meijer)