The Impact of COVID-19 Already Visible... Retail Sales Indicators Show a Decline in Rebound Trend

Due to the impact of the novel coronavirus infection, consumer sentiment is shrinking, and on the 28th, Gwangjang Market in Jongno-gu, Seoul, is showing a quiet scene. Photo by Jinhyung Kang aymsdream@

[Sejong=Asia Economy Reporter Joo Sang-don] The economic recovery in Gyeonggi Province slowed down in January this year due to the impact of the novel coronavirus infection (COVID-19). The retail sales index recorded its largest decline in 8 years and 11 months, and investment also showed a sluggish trend.

The current indicators did not fully reflect the impact of COVID-19. Statistics Korea forecasted that the February indicators would be adversely affected by COVID-19.

According to Statistics Korea's "January 2020 Industrial Activity Trends" released on the 29th, retail sales in January decreased by 3.1% compared to the previous month, as sales of passenger cars, shoes and bags, and cosmetics declined. This is the largest drop in 8 years and 11 months since February 2011, when it recorded -7.0%.

An Hyeong-jun, Director of Economic Trend Statistics at Statistics Korea, said, "Since December last year, travel consumption has decreased due to a reduction in Chinese tourists, and duty-free sales have declined due to fewer Chinese tourists at duty-free shops. Since the first confirmed domestic case of COVID-19 occurred on January 20, the impact of COVID-19 is limited."

Investment was also sluggish. Facility investment decreased by 6.6% compared to the previous month, with reductions in machinery such as special industrial machines (-6.0%) and transportation equipment such as automobiles (-8.0%). Industrial production increased by 0.1% compared to the previous month. The coincident index and leading index cyclical components rose by 0.3 points and 0.1 points respectively compared to the previous month. Director An explained, "With the indices rising together for two consecutive months, the indicators suggest that the economic recovery continued last month. However, since COVID-19 is less reflected, it is difficult to judge the future economy based solely on the indices."

Statistics Korea expects that the impact of COVID-19 will be fully reflected in the February industrial indicators, but the economy will show improvement again after the end of COVID-19. Director An said, "February will be a difficult month for economic recovery, restricting the recovery trend," and added, "During the Middle East Respiratory Syndrome (MERS) outbreak, the impact appeared immediately after the occurrence but rebounded quickly after resolution."