(Recasts, adds analyst comments and markets)
By Kim Kyoung-wha
SEOUL, Nov 28 (Reuters) - South Korea's industrial output rose at its fastest pace in more than two years in October on brisk sales of cars and semiconductor chips, helping calm fears Asia's fourth-largest economy is losing steam.
But economists cautioned against drawing too much optimism from the figures released on Thursday as consumer spending continued to show signs of faltering.
Industrial output rose 2.4 percent in October from September, beating a forecast for a 1.4 percent rise in a Reuters survey of 10 economists.
From a year ago, output jumped 12.7 percent in October, the strongest growth in more than two years, the National Statistical Office (NSO) said.
"The data confirms the economy stays on an upward trend," said Lim Ji-won, an economist at J.P. Morgan. "Consumption is not cooling off rapidly but the rising trend is a bit weak," she said.
Wholesale and retail sales jumped 7.0 percent in October from a year ago, versus a 2.9 percent rise in September, the NSO said. But sales rose a scant 0.2 percent on the month as government steps to curb consumer spending, a key contributor to growth, continued to bite.
"Exports have yet to see signs of slowing down. One worrying aspect of the report was wholesale and retail sales remained quite subdued," said Rob Subbaraman, an economist at Lehman Brothers. "The economy will start to slow somewhat in coming months."
Seoul's main bourse cheered the data. The Korea Composite Stock Price Index jumped more than two percent in early trade. The won edged down versus the dollar, while bonds fell.
The NSO attributed the month-on-month growth partly to the the country's thanksgiving holidays falling in September.
STRONG CHIPS, AUTOS
"More working days led to a broad-based increase in production, consumption and investment," the NSO said in a statement. "Output of chips and autos took the lead with clothes and office machinery on the decline."
Racy new car models, improved quality and extended warranties have propelled South Korea into the world's fifth-largest producer of automobiles.
South Korean carmakers are expected to sell 1.64 million vehicles this year, up from 1.45 million last year, led byMotor Co .
Meanwhile, Samsung Electronics , the world's leading memory chipmaker, has been particularly successful in boosting its production of more lucrative and faster DDR DRAM (double data rate dynamic random access memory) chips.
The industrial output data indicated a strong performance in the manufacturing sector, which saw production rise 12.8 percent in October on the year after a 3.4 percent rise in September.
South Korea's leading index, which predicts economic performance in coming months, rose 1.5 percent in October, marking its third consecutive monthly rise, data showed on Thursday.
The central bank expects South Korea's economy to expand more than six percent this year after a three percent rise in 2001. The Organisation for Economic Cooperation and Development projected growth of 5.8 percent in 2003.