Seoul, Feb 7 (IANS): The employment scenario in South Kore continues to improve, but other economic indicators have weakened amid persistent inflation, the finance ministry said Tuesday.

"Our economy saw employment maintain its recovery trend, but economic indicators such as industrial output and retail sales were weakening amid lingering inflation expectations," the Ministry of Strategy and Finance said in its Green Book, a monthly report assessing the nation's economic conditions.

Asia's No.4 economy created more than 400,000 jobs for the third straight month in December, sending the jobless rate down to 3 percent last month. Despite falling job creation in the manufacturing sector, continued job growth in the service industry boosted the country's labour market, Xinhua reported.

In contrast, industrial output and retail sales decreased amid weaker exports. Output in mining, manufacturing and electricity and gas sectors diminished 0.9 percent on-month in December after shrinking 0.3 percent and 0.6 percent respectively in November and October. Retail sales posted a 0.2 percent on-month reduction last month.

Exports, which account for more than half of the South Korean economy, recorded the first on-year reduction in more than three years in January, posting trade deficit for the first time in two years. Exports contracted 6.6 percent on-year to $41.54 billion last month, with trade deficit amounting to $1.96 billion.