Refer Report
Statistics Korea August industrial activity trend, semiconductor and automobile production booming
Compared to a year ago, production in the consumer, wholesale and retail industries continues to be sluggish.
Decline in facility investment and construction investment… Coincident Index falls for 6th straight month
Haeundae Beach, Busan. Yonhap News.
Last month, industrial production increased for the first time in four months thanks to increased automobile and semiconductor production. As outdoor activities increase during the holiday season, consumption, which had been sluggish so far, recorded its highest increase in 18 months. However, as the temporary factor is large and the decline continues compared to a year ago, it is impossible to guarantee whether domestic demand will rebound.
The National Statistical Office announced on the 30th that last month’s production index for all industries (excluding seasonally adjusted agriculture, forestry and fisheries) was 113.7 (2020 = 100), an increase of 1.2% from the previous month. All-industrial production, which increased by 1.4% in April, continued to decline in May (-0.8%), June (-0.1%), and July (-0.6%) before recording an increase again in four months.
Mining and industrial production increased by 4.1% from a month ago, with increases in automobiles (22.7%) and semiconductors (6.0%). Compared to a year ago, semiconductor production increased by 10.3%, and mining and industrial production increased by 3.8%.
Service industry production also increased by 0.2% compared to the previous month due to increased production in wholesale and retail (3.0%) and accommodation and restaurants (4.4%). It is analyzed that the decrease in precipitation compared to the average year, the effect of the August holiday season, and the increase in the inflow of foreign tourists have had an impact. As the number of professional baseball spectators increased and large-scale concerts were held one after another, the service industry related to arts, sports, and leisure also jumped 9.0% compared to the previous month. However, compared to a year ago, lodging and restaurants (0.0%) are stagnant, and wholesale and retail (-1.3%) continue to decline, making it too early to talk about recovery.
Retail sales, which show trends in goods consumption, increased 1.7% from the previous month. This is the highest increase rate in 18 months since it increased 4.0% in February 2023. Sales of both non-durable goods such as food and beverages (2.7%) and durable goods such as passenger cars (1.2%) increased. The National Statistical Office explained, “As demand for going out increases during the holiday season, vehicle fuel consumption has jumped significantly, and sales of passenger cars have also increased.”
Trends of domestic demand-related indicators
However, it has not been able to escape the slump for 7 consecutive months, with a 1.3% decrease compared to a year ago. An official from the Korea Development Institute (KDI) said, “Compared to the indicators from a month ago, the amplitude is large, making it difficult to accurately diagnose the economy,” and added, “The judgment of the economy may be delayed, but it must be compared with the same period last year.”
In particular, this domestic demand rebound is largely due to temporary factors such as the ‘holiday effect’. The Ministry of Strategy and Finance is also cautious about whether the retail sales boom will continue. An official from the Ministry of Strategy and Finance said, “We cannot say anything for sure because card sales must be finalized by September,” and added, “We are watching carefully.”
Investment, another domestic demand indicator, also remains low. Investment in both transportation equipment (-15.4%) and machinery such as semiconductor manufacturing machines (-1.0%) decreased, with facility investment decreasing by 5.4% from a month ago. Construction performance also decreased by 1.2% compared to the previous month due to a decrease in construction performance (-2.4%). Compared to a year ago, it decreased by 9.0%, and the decline was larger than the previous month (-5.2%).
The cyclical fluctuation value of the coincident index, which shows the current economy, was 98.2, down 0.1 points from the previous month. It has been a ‘negative’ trend for six consecutive months since March of this year. Statistics Korea explained, “This is due to sluggish construction investment and decreased imports.” As the amount of construction orders decreased, the cyclical fluctuation value of the leading index, which predicts future economic conditions, also fell by 0.1 point to 100.6.
Source: Korean