Due to the Resurgence of COVID-19... Industrial Production Declines Again (Update)

Statistics Korea, August Industrial Activity Trends

Total Industrial Production Down 0.9% MoM... Production in Mining, Manufacturing, and Construction All Decline
Manufacturing Shipments Down 1.4%·Inventory Up 2.1%
Manufacturing Average Operating Rate 69.6%, Down 0.5%p MoM
Retail Sales Index Up 3.0% MoM... Increased Sales of Home Appliances and Food Products
Coincident Index Cyclical Component Up 0.4p·Leading Index Cyclical Component Up 0.6p

[Asia Economy Reporter Joo Sang-don] Due to the resurgence of COVID-19, total industrial production returned to a decline in August.

According to the 'August Industrial Activity Trends' released by Statistics Korea on the 29th, total industrial production (seasonally adjusted, excluding agriculture, forestry, and fisheries) decreased by 0.9% compared to the previous month. This marks the first decline in total industrial production in three months since May (-1.2%) of this year.

Mining and manufacturing production decreased by 0.7% month-on-month as increases in electricity and gas were offset by declines in mining and manufacturing. In particular, manufacturing production fell by 1.0% compared to the previous month due to decreases in food products (-7.3%) and automobiles (-4.1%).

Manufacturing shipments increased in semiconductors (4.3%) and communication and broadcasting equipment (18.7%), but decreased in automobiles (-3.9%) and food products (-5.0%), resulting in a 1.4% decline compared to the previous month. The decrease in domestic demand was larger. Domestic shipments fell by 1.8% while exports decreased by 0.9% compared to the previous month.

On the other hand, manufacturing inventories increased by 2.1% month-on-month. The inventory ratio rose by 4.1 percentage points compared to the previous month. The manufacturing average operating rate was 69.6%, down 0.5 percentage points from the previous month.

Service industry production increased in finance and insurance (3.7%) and health and social welfare (0.4%), but decreased in accommodation and food services (-7.9%) and wholesale and retail trade (-1.5%), resulting in a 1.0% decline compared to the previous month.

The retail sales index rose 3.0% compared to the previous month, with sales of semi-durable goods such as clothing decreasing (-4.4%), but durable goods such as home appliances (12.7%) and non-durable goods such as food products (0.9%) increasing. The 6% decline in July, caused by the expiration of emergency disaster relief funds and a 70% reduction in the individual consumption tax on automobiles, was reversed in August.

Investment also failed to escape a downward trend in August. Facility investment decreased by 4.4% compared to the previous month due to declines in machinery such as special industrial machinery (-5.8%) and transportation equipment such as ships (-0.2%). Construction performance (constant prices) also fell by 7.1% compared to the previous month due to decreases in building (-6.5%) and civil engineering (-8.5%) works.

However, the coincident index cyclical component, which reflects the current economic situation, rose by 0.4 percentage points compared to the previous month. The leading index cyclical component, which forecasts future economic conditions, also increased by 0.6 percentage points.