South Korea's economic growth stayed below 1 percent for four straight quarters through the third quarter as manufacturing activity weakened on Samsung Electronics' Galaxy Note 7 discontinuation and labor strikes in major automakers, central bank data showed on Tuesday.
Seasonally adjusted figure for real gross domestic product (GDP) amounted 377.95 trillion won (332.59 billion U.S. dollars) in the July-September period, up 0.7 percent from the previous three-month period, according to the Bank of Korea (BOK).
It was down from a 0.8-percent expansion tallied in the second quarter, staying below 1 percent for four straight quarters. Except for the 1.2-percent growth in the third quarter of last year, the real GDP increased less than 1 percent since the second quarter of 2014. From a year ago, the third-quarter real GDP expanded 2.7 percent, down from a 3.3-percent expansion in the second quarter.
The slower economic growth followed Samsung's global recall in early September of 2.5 million Galaxy Note 7 smartphones that faced discontinuation in the end in October. Workers in Hyundai Motor and its affiliate Kia Motors, the country's top two automakers, went on partial strikes during the July-September period, helping drag down production in the manufacturing sector.
Production among manufacturers declined 1.0 percent in the third quarter compared with the previous quarter, posting the lowest figure in seven and a half years. In the second quarter, the manufacturing production increased 1.2 percent.
The Galaxy Note 7 effect is forecast to continue in the fourth quarter as inconveniences that Note 7 buyers experienced in the recall and discontinuation process did damages to Samsung's brand image.
Outlook for Samsung's earnings got grimmer as the South Korean tech behemoth is forced to compete in the global market without any new devices in the last quarter when tech companies usually record the largest revenue of the year.
Exports of telecommunications devices such as smartphones tumbled 28.1 percent for the first 20 days of October compared with the same period of last year, according to customs data.
Private consumption rose 0.5 percent in the third quarter from three months earlier as the end of a temporary cut in consumption tax led to a fall in auto sales. The third-quarter figure was down from a 1.0-percent increase in the second quarter.
Facility investment shed 0.1 percent in the third quarter after growing 2.8 percent in the previous quarter as companies refrained from spending capital in facilities amid growing economic uncertainties.
The Asia's No.4 economy managed to be bolstered by the construction sector as record-low borrowing costs led people to invest in the real estate market and boosted transactions in homes.
Construction investment rose 3.9 percent in the quarter from three months ago, higher than a 3.1-percent growth in the second quarter. From a year earlier, the figure surged 11.9 percent.
Fiscal expenditure rallied 1.4 percent in the third quarter, up from a 0.1-percent gain in the second quarter as the government increased spending with money from supplementary budget plan.
The government's expenditure helped prop up the GDP growth, but its effect is expected to reduce sharply in the fourth quarter as extra budget was frontloaded to the third quarter.
Record-low borrowing costs here are not to be kept for long as the U.S. Federal Reserve is widely forecast to raise interest rates within this year.
The BOK may be forced to lift rates with a certain time gap on fears for foreign capital outflow following the Fed's rate hike.
Household debts in South Korea maintained a record-breaking trend as the BOK cut its benchmark interest rate from 3.25 percent in July 2014 to an all-time low of 1.25 percent in June this year.
Rising debt-servicing burden among households would weigh down on private consumption, casting a cloud over growth outlook.
The BOK set its 2017 growth outlook for South Korea at 2.8 percent, higher than that of private economic think tanks ranging from 2.2 percent to 2.6 percent.
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