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By Yoo Choonsik
SEOUL, Nov 28 (Reuters) - South Korea's industrial output rose three times faster than expected in October, fanned by strong exports and marking the third consecutive monthly increase.
Output rose a seasonally adjusted 2.4 percent in October from the previous month, government data showed on Friday, helped by strong exports of automobiles, semiconductors and chemical products.
The growth easily beat the 0.8 percent rise forecast in a Reuters survey of 10 economists taken this week.
Analysts expressed surprise at the rapid pace, although they warned that fragile domestic consumption was likely to act as a drag on further recovery for the economy which bounced out of recession in the third quarter.
"The numbers are very surprising, even if 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, indicating companies are approaching a time when they will have to expand capacity to meet growing demand.
The latest figures sent stocks up around two percent while the local debt market tumbled, with the three-year treasury yield surging nine basis points to 4.85 percent on the prospect of a broader economic rebound.
FRAGILE CONSUMPTION
Ignoring seasonal factors, output rose 7.4 percent in October from a year ago, versus a revised 6.7 percent rise in September and a 13.8 percent rise in October 2002, the National Statistical Office (NSO) said.
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, the NSO said.
The monthly index for wholesale and retail sales is highly volatile but sales have been trending higher since the middle of this year.
"Consumer spending is seen to be improving amid a recovery in the service sector, driven by a fast-rebounding manufacturing industry," said Lee Sang-jae, an economist at Hyundai Securities.
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.
The data came several weeks after the central bank upgraded its view on the economy, saying the export-led recovery in the economy was stronger than it had expected and that this year's growth might be faster than its latest forecast.
The South Korean government is targeting economic growth of more than three percent this year and over five percent growth next year. The Organisation for Economic Cooperation and Development forecasts growth of 2.7 percent this year and 4.7 percent next year.
Exports in the January-October period grew 18 percent from a year before and the government expects shipment abroad to grow about 17 percent for the whole of the year to a record of over $190 billion from $162 billion in 2002. (Additional reporting by Kim Kyoung-wha, Oh Jung-hwa, Lim Jeongjin)