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UPDATE 1-S.Korea May factory output unexpectedly declines on auto chip shortages

(Adds details, analysts comments)

SEOUL, June 30 (Reuters) - South Korea’s factory output in May unexpectedly declined from April but registered its fastest annual expansion in nearly 11 years after 2020’s pandemic-induced slide.

Industrial production fell by a seasonally adjusted 0.7% last month, Statistics Korea data showed on Wednesday, missing a 0.8% gain forecast in a Reuters survey. It followed a 1.6% contraction in April, when it marked the biggest contraction since may 2020.

A breakdown of data showed production of cars shrank 6.6% from April on auto chip shortages, while that of mechanical equipments also slumped 5.6%. That offset a 5.3% rise in production of semiconductors, the country’s top export.

“Production disruptions in the auto sector continued (in May) due to auto chip shortages. Domestic car production in May was down 21% month-on-month to 256,000 units,” said Kim Ye-in, an analyst with Korea Investment & Securities.

On a yearly basis, factory output surged 15.6%, missing a forecast of 16.1% rise, but recording the fastest growth since June 2010 as production was seen sharply picking up from a sluggish period in 2020 when the coronavirus pandemic paralysed economic activities and supply chains.

“We expect global demand momentum to remain strong and continue to drive Korea’s exports and production,” said Park Chong-hoon, head of research at Standard Chartered Bank Korea. (Reporting by Joori Roh; Editing by Christopher Cushing & Shri Navaratnam)

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