(SEOUL=NEWSIS) The South Korean economy is recovering modestly on improved industrial production despite the remaining uncertainties such as earlier-than-expected rate increase in the United States, a government report showed Wednesday.

"Lower oil prices led the consumer price inflation to stay low, but employment growth accelerated, with industrial output rebounding. Those indicated a modest economic recovery," the Finance Ministry said in Green Book, the ministry's monthly economic assessment report.

Production in mining and manufacturing industries expanded 2.6 percent in February from a month earlier due to a rebound in auto production and the continued rise in chip output.

The March industrial activity is expected to maintain a recovery trend amid positive effects from the launches of new IT and car models, but oil refiners would enter the period of regular maintenance, which could limit recovery in industrial activity.

Retail sales rose 2.8 percent in February on a monthly basis due to demand for semi-durables and non-durables. Sales in department stores and discount outlets reduced in March, but sales in cars and via online shopping malls increased last month.

Consumer price inflation declined to 0.4 percent in March, the lowest since July 1999 when consumer prices rose 0.3 percent on a yearly basis. The headline inflation kept a zero-percent increase for four months in a row.

Trade surplus reached a record monthly high of 8.39 billion U.S. dollars in March, but it came as imports reduced at a faster pace than exports.

The U.S. recovery was pausing on strong dollar and cold weather, but the euro zone economy was on a recovery track due to the European Central Bank (ECB)'s quantitative easing and the subsequent deprecation of the euro, the ministry said.

The ministry said there remained external uncertainties such as the possible rate hike in the United States and the weak Japanese yen, but it noted that positive factors emerged like lower oil prices and asset price rises.