[Economic Outlook] Focus on Whether Consumer Prices Rise 2%... Industry Trends and Last Year's Corporate Performance Also Revealed

Next Week's Major Economic Schedule

On the evening of February 15th, around 9 PM, the store signs located near Jamsilsaenae Station in Songpa-gu, Seoul, were brightly lit. (Image source=Yonhap News)

[Sejong=Asia Economy Reporter Moon Chaeseok] As the South Korean economy recovers from the slump caused by the COVID-19 pandemic, concerns about inflation (rising prices) are growing, and next week the consumer price inflation rate for May will be released. Additionally, the industrial activity trend index, which can be considered a comprehensive indicator of the real economy, will also be published.

The Statistics Korea will announce the consumer price trend results on the 2nd of next month. The May consumer price inflation rate is expected to be around the mid-2% range. This is largely due to the base effect since the inflation rate in May last year was negative (-0.3%), prices of agricultural and livestock products remain high, and the upward trend in international oil prices has not easily subsided. The government predicts that prices may remain temporarily high in the second quarter but will be below 2% on an annual basis.

Earlier, on the 31st, Statistics Korea will release the industrial activity trend for last month. This is the most comprehensive coincident indicator to assess the real economy, allowing an estimation of the extent of economic recovery. In March, total industrial production increased for the second consecutive month. Key indicators improved, including consumption which saw the largest increase since August last year, expanding the economic recovery trend. Whether this trend continued in April is a point of interest.

The Bank of Korea will release the "2020 Corporate Management Analysis Results (Preliminary)" on the 3rd of next month. According to the analysis results for the third quarter of last year, sales of 20,914 domestic companies (11,300 in manufacturing and 9,614 in non-manufacturing) decreased by 3.2% compared to the same period a year earlier due to the impact of COVID-19 and other factors. Compared to the more than 10% contraction in the second quarter, the decline in sales narrowed due to export recovery and other factors.

The debt ratio (86.8%) and borrowing dependence (25.3%) in the third quarter both fell compared to the second quarter (87% and 25.5%, respectively), and the interest coverage ratio (operating profit/interest expense) rose from 446.95% to 520.75% within one quarter. Attention is focused on whether this trend of improving profitability and financial soundness of domestic companies continued into the fourth quarter of last year, and how severely companies were affected by COVID-19 throughout the entire year.