Statistics Korea July Industrial Activity Trends Released
Total Industry Production Up 0.1%, Retail Sales and Facility Investment Down 6% and 2.2% Respectively
[Sejong=Asia Economy Reporter Kim Hyunjung] The effect of the disaster relief funds distributed in May disappeared within two months, causing consumption in July to plummet by 6% compared to the previous month. Since the statistics do not yet reflect the resurgence of the novel coronavirus infection (COVID-19) that began in mid-month, further deterioration of indicators is expected next month.
According to the "July Industrial Activity Trends" announced by Statistics Korea on the 31st, total industrial production (seasonally adjusted, excluding agriculture, forestry, and fisheries) in July increased by 0.1% compared to the previous month. Thanks to a 14.4% increase in automobile production, manufacturing and service production rose by 1.6% and 0.3%, respectively. Retail sales, which indicate consumption trends, decreased by 6.0% compared to the previous month. Although it increased by 0.5% compared to the same period last year, it showed the largest decline in five months since February (-6.0%) due to the disappearance of the disaster relief fund effect distributed in May and the reduction in the individual consumption tax cut on automobiles.
Regarding this, Ahn Hyungjun, Director of Economic Trend Statistics at Statistics Korea, explained, "Consumption was severely contracted in February and March, then rebounded from April after the individual consumption tax cut on automobiles began in March, and retail sales increased due to policy effects such as the distribution of disaster relief funds in May and June." He added, "However, retail sales decreased compared to the previous month due to the reduction in the individual consumption tax cut in July and the exhaustion of disaster relief funds (90% used up in May and June)." Director Ahn further noted, "However, when looking at the year-on-year comparison, it can be confirmed that the level before the COVID-19 outbreak is being maintained."
Facility investment decreased by 2.2% compared to the previous month due to a decline in domestic shipments of car sales, which led to a decrease in transportation equipment investment. Construction performance, which reflects actual construction by construction companies, increased by 1.5%. However, it was explained that investment in industrial machinery and display manufacturing equipment is still ongoing. The coincident index of economic indicators, which represents the current economy, rose by 0.2 points compared to the previous month, and the leading index, which predicts future economic conditions, also increased by 0.4 points compared to the previous month.
Statistics Korea also emphasized caution in interpreting related indicators as the situation in July and August has changed significantly. Until July, consumption maintained last year's level and production showed improvement compared to the previous month, but the rapidly increasing number of COVID-19 cases in August indicates a difficult situation. Director Ahn said, "Although 90% of the total disaster relief funds for May and June have been used up, it is necessary to consider the multiplier effect in the overall macroeconomic cycle before concluding that the effect of the disaster relief funds has completely ended." He added, "The pattern of COVID-19 spread is sensitive and quickly reflected in overall industrial activity, so the August indicators are expected to reflect the recent (resurgence) situation." He further stated, "The fluctuations in the indicators are also dominated by the COVID-19 situation," and added, "Uncertainty is increasing due to the overseas spread of COVID-19 as well."
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