(Updates with comments, details, background)
By Kim Myong-hwan
SEOUL, Jan 29 (Reuters) - South Korea's industrial output rose 2.3 percent in December from November, defying forecasts for a decline thanks to a surge in production of automobiles and computer chips, the statistics office said on Wednesday.
But in a worrying indicator for future output, wholesale and retail sales dropped 2.3 percent, reflecting measures introduced in October to cool a red-hot real estate market and curb a surge in household debt.
The higher industrial output number, which was seasonally adjusted and provisional, compared with a 0.8 percent increase in November and forecasts for a 0.6 percent drop in a Reuters survey of 10 economists on Monday.
"Robust growth in automobiles and semiconductors contributed a lot to the month-on-month output rise in December," the National Statistical Office (NSO) said.
Mirroring the dampened domestic demand, inventories rose 2.3 percent in December from a month earlier, after falling 0.8 percent in November, the NSO said.
Domestic consumer confidence has dipped recently as a crisis over the nuclear ambitions of communist neighbour North Korea and a possible U.S. attack on Iraq have cast a pall over the global economy.
"A slowdown in consumption will certainly hurt the supply side, although there will be a time lag," said Lee Soo-hee, economist at Korea Economic Research Institute.
"But production activity will not fall sharply because year-end bonus payments and tax refunds are expected to reinforce purchasing power in the early months of this year."
DECEMBER EXPORT DRIVE
Some analysts said an extra push to make the yearly export data look good, a suggestion the government denies, helped fuel the better-than-expected output showing. Export-driven demand, focused on vehicles, semiconductors and information technology products, was strong in December.
"There must have been a drive to push out exports in December," said Kwon Sung-il, an economist at CJ Investment Trust & Securities.
"In addition, consumption was not as weak as we expected because of an expected increase in salaries as a result of the relatively good corporate performance last year."
Year on year, seasonally unadjusted output rose 9.5 percent in December versus November's 7.2 percent rise, the NSO said.
Industrial output was up 7.3 percent in all of 2002, compared with a 1.3 percent rise a year ago, it said.
The NSO said output of automobiles, about half of which go abroad, jumped 8.2 percent in December from November and 45.9 percent from a year earlier.
"The year-on-year increase in vehicles looks sharp because Hyundai Motor was hit badly by a labour dispute in December 2001," said Yoon Myong-joon, director of the NSO's industrial statistics division.
Semiconductor production, about 86 percent of which is for overseas consumers, surged 23.9 percent from a year earlier, while IT products rose 17.4 percent.