S.Korea factory output declines in March

South Korea's industrial output reversed two months of increases in March as Europe's debt crisis depressed exports amid sluggish domestic demand, according to the latest official figures.

Production fell a seasonally adjusted 3.1 percent from a month earlier in March following a revised 0.6 percent gain in the preceding month, Statistics Korea said on Monday.

It grew 0.3 percent year-on year compared with a revised 14.3 percent gain in February.

Jeon Baek-Geun, a director at the statistical agency, said the weak global economic recovery hit audio and video equipment and machinery exports.

Hyundai Securities analyst Lee Sang-Jae said a marked slowdown in exports, a fragile improvement in domestic demand and the petrochemical industry's temporary production halt for a seasonal check-up, likely led to the weakness.

Another analyst said output was expected to remain weak in the coming months, fanning expectations of a rate cut later this year.

"Companies are keeping their inventories at a relatively high level, while plant operations are running low," said Peter Park of Woori Investment and Securities.

"Combined with weak private consumption owing to higher oil prices, this likely will fan expectations of a possible rate cut later this year."

Park said a steady fall in consumers' inflation expectations, renewed concerns about Europe's debt woes and weakening domestic economic growth momentum would also make a rate cut likelier.

-- Dow Jones Newswires contributed to this report --

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