Decline in Total Industrial Production Due to COVID-19 Resurgence... Decreases Again After 3 Months (Comprehensive)

Statistics Korea, August Industrial Activity Trends

Total Industrial Production Down 0.9% MoM... Production in Manufacturing, Services, and Construction All Decline
Manufacturing Shipments Down 1.4%, Inventory Up 2.1%
Manufacturing Average Operating Rate at 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... "Impact of Re-spread Not Reflected"

Ahn Hyeong-jun, Director of Economic Trend Statistics at the Statistics Korea, is briefing on the industrial activity trends for August 2020 at the Government Sejong Complex in Sejong City on the morning of the 29th.
[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Joo Sang-don] Due to the impact of the re-spread of the novel coronavirus disease (COVID-19), total industrial production in August turned to a decline for the first time in three months. Manufacturing production decreased by 1% due to reduced exports, and service sector production turned to a decline after five months.

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 is the first time in three months since May (-1.2%) that total industrial production has declined month-on-month. Ahn Hyung-jun, Director of Economic Trend Statistics at Statistics Korea, explained, "Industrial trends turned to a decline after three months due to the impact of the COVID-19 re-spread," adding, "Service sector production decreased for the first time in five months, and manufacturing also declined by 1.0% due to reduced exports."

Mining and manufacturing production decreased by 0.7% month-on-month, although electricity and gas production increased. In particular, manufacturing production declined 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 month-on-month. Domestic demand decreased more significantly. 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 average operating rate in manufacturing was 69.6%, down 0.5 percentage points from the previous month.

Service sector 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 month-on-month.

The retail sales index increased by 3.0% compared to the previous month, with sales of durable goods such as home appliances (12.7%) and non-durable goods such as food products (0.9%) rising, although semi-durable goods like clothing (-4.4%) declined. Director Ahn explained, "There are two factors: first, a base effect as the reduction in individual consumption tax on automobiles decreased in July, which was very poor, then increased in August. Also, the historically long rainy season and the end of the home appliance purchase rebate program affected retail sales decline."

Investment in August also failed to escape a downward trend. Facility investment decreased by 4.4% month-on-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, with decreases in both building (-6.5%) and civil engineering (-8.5%) works.

The coincident index cyclical component, which reflects the current economic situation, rose by 0.4 percentage points month-on-month. The leading index cyclical component, which forecasts future economic conditions, also increased by 0.6 percentage points. This is because the impact of the COVID-19 re-spread was not reflected. Director Ahn said, "The survey was conducted in mid-August and based on that, so the recent re-spread was not reflected," adding, "Looking at the cyclical component values themselves, May this year (leading index 99.4, coincident index 96.8) was the lowest point, but since then there has been an upward base, showing signs of improvement."