By Lee Chi-dong
Staff Reporter

The Ministry of Finance and Economy (MOFE) on Tuesday announced that the economy hit the bottom in the third quarter but economic polarization is deepening with production and exports growing amid sluggish domestic consumption and investment.

``The economy has moved out of recession,’’ MOFE director Kang Ho-in told reporters. ``Companies are also coming under increasing pressure to expand facility spending, while consumption is showing signs of improvement.’’

He added that the economy is on the recovery track, although its signs are feeble due to shortened economic cycles.

The flamboyant remarks followed a batch of impressive data; especially, the recent industrial output and export growth figures.

The cheery data show that industrial production rose 7.4 percent in October from a year earlier, while exports recorded 22.5 percent growth in November from a year ago.

The MOFE expected that companies would soon start increasing facility investment to cover the growing demand.

``The gap between production capacity and actual output is widening,’’ Kang said. ``It means firms will be forced to make more investments.’’

According to the National Statistical Office (NSO), production capacity increased by only 0.2 percentage point to 2.7 percent in October, while the growth rate of industrial output leapt to 7.4 percent from 6.6 percent.

``Furthermore, consumption will not likely exacerbate for the time being,’’ he added. ``A leading index of the OECD (Organization for Economic Cooperation and Development) is continually pointing to positive territory.’’

Nonetheless, experts caution that the abnormal recovery signs overshadow optimism. They say the economy is not exempt from the specter of a double-dip or triple-dip recession.

In fact, investment growth is lagging far behind that of exports driven by a burgeoning boom in major economies worldwide.

Industrial output grew only 1.9 percent in October from a year ago, with the country’s traditional flagship industries like automobiles and semiconductors excluded.

``It proves most of the industries related to private consumption remain weak,’’ Huh Chan-kook, chief macroeconomist at the Korea Economic Research Institute said. ``The October industrial output data, seemingly improved, explicitly showed various problems plaguing the economy.’’

Despite improvements in inventories, capital investment fell for the fourth consecutive month, recording a 3.8 percent decline in October.

``The stereotypical rule of linking exports and investment has already been broken here,’’ Huh stressed.

Most local companies will not expand investments unless economic and political uncertainties are resolved, he added.

Private spending is also suffering from deepening polarization between high-wage earners and others.

Consumption jumped 7 percent in the third quarter among high-income households, while it increased only 3.5 percent among low- to middle-income ones.

In addition, retail sales recorded a 3.4 percent drop in October, worsening from a 1.5 percent fall in September, according to the NSO.

Hong Soon-young, economist at the Samsung Economic Research Institute, said that it will take quite a long time for consumption to return to a full-scale recovery track.

``The Korean economy is in a puzzling state that is hard to understand within ordinary economic principles,’’ he said. ``It is caused by the various uncertainties shrouding the economy.’’

lcd@koreatimes.co.kr