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UPDATE 1-S.Korea ind output records biggest fall in 7 years

(Updates with NSO comments, details)

SEOUL, Aug 28 (Reuters) - South Korea said on Thursday industrial output recorded its sharpest monthly fall in seven years in July, mainly due to the impact of labour unrest at the country's largest carmaker.

Production dropped a provisional 3.9 percent in July from June, the worst performance since June 1996, when it fell by the same pace, and after a 2.8 percent rise in June, the National Statistical Office (NSO) said.

The seasonally adjusted monthly reading was worse than forecasts for a 1.1 percent fall in a Reuters survey of 10 economists conducted on Tuesday.

"A strike at Hyundai Motor Co Ltd is largely to blame for the poor performance in July," said Shin Seung-woo, a director at the NSO's industrial statistics division.

"Without the Hyundai impact, July industrial output could have grown, albeit slowly."

Earlier in August, Hyundai Motor resolved the strike, which cost the company $1.2 billion in lost production, after caving in to union's demand for an 8.6 percent rise in basic pay, more say in managerial decisions and a shorter workweek.

Before taking into account seasonal factors, output rose 0.7 percent in July year-on-year, versus June's 8.4 percent rise and a 10.6 percent rise in July, 2002, the NSO said.

Analysts said strong exports, led by IT (information-technology) items, limited the damage from the labour troubles at Hyundai Motor.

Total exports rose 15.5 percent to $15.5 billion in July from a year earlier, the commerce ministry said, led by wireless telecommunications devices, which were up 53.5 percent, and computers, which rose 20.2 percent.