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UPDATE 1-S.Korea ind output up for 3rd month, tops forecast

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SEOUL, Nov 28 (Reuters) - South Korea's industrial output rose three times as fast as expected in October, fanned by strong exports and marking the third consecutive monthly increase, government data showed on Friday.

Output rose a seasonally adjusted 2.4 percent in October on the month, aided by strong exports of automobiles, semiconductors and chemical products, easily beating a median forecast for a 0.8 percent rise in a Reuters survey of 10 economists conducted earlier this week.

Analysts expressed surprise at the rapid pace, although they warned that fragile domestic consumption was likely to act as a drag on a broader economic recovery in Asia's fourth-largest economy, which had fallen into recession in the first half.

"The numbers are very surprising, even we take into account a strong recovery in exports", said Kho Yu-sun, an economist at Meritz Securities.

"It indicates the economy is likely to maintain its recovery momentum, but concerns about the sustainability of the improvement still remain as we have yet to see an increase in corporate spending to boost sagging local consumption."

The latest data showed factories were operating at the highest rate of utilisation in 6-½ years as companies remained wary about expanding capacity despite growing export demand.

South Korea has said the economy would begin recovering from late this year but warned private consumption might not pick up swiftly. Wholesale and retail sales in October rose 1.5 percent from September after seasonal adjustments.

Concerns about a sluggish recovery in consumption have recently intensified because of financial troubles in the credit card industry and amid a string of prosecution probes at business groups linked to suspected political funding scandals.

Without taking into account seasonal factors, output also rose 7.4 percent in October year-on-year, versus a revised 6.7 percent rise in September and a 13.8 percent rise in October 2002, the NSO said.