Last Year, Industrial Production, Consumption, and Investment All Increased for the First Time in 4 Years

Clear Recovery Trend... Uncertainty Remains Due to Omicron Spread and Tightening Policies

[Asia Economy Sejong=Reporter Kwon Haeyoung] Last year, industrial production, consumption, and investment all increased simultaneously, achieving a 'triple increase' for the first time in four years. Despite the impact of COVID-19, the economic recovery trend became clear, showing signs of emerging from the shock. However, with the spread of the COVID-19 variant Omicron, monetary tightening policies in major countries, and economic uncertainties due to the Ukraine crisis, it is uncertain whether this recovery trend will continue this year.

According to the 'December 2021 and Annual Industrial Activity Trends' released by Statistics Korea on the 28th, the annual total industrial production index for 2021 was 112.5, an increase of 4.8% compared to the previous year. Although it recorded a negative for the first time since statistics began a year earlier, it successfully rebounded due to economic recovery, showing the largest increase in 11 years since 2010 (6.5%).

Production in the mining and manufacturing industries, including manufacturing, increased by 6.9%, driving the overall industrial production growth. Manufacturing increased by 7.1% with semiconductor production up 29.7% and automobile production up 4.6%. The average operating rate of manufacturing also rose by 4.3% from the previous year to 74.3%. Service industry production increased by 4.3% year-on-year, with finance and insurance (8.5%) and wholesale and retail trade (4%) maintaining growth. Face-to-face sectors such as accommodation and food services (1.4%), education services (1.9%), and arts, sports, and leisure (6.9%) improved due to expanded vaccination, resulting in increases across all sectors.

Facility investment rose 9% year-on-year, supported by increased investment in machinery such as special industrial machinery (13.2%). Retail sales, which indicate consumption trends, also increased by 5.5%, marking the largest increase since 2010 (6.7%). This was attributed to increased outdoor activities following expanded vaccination, leading to higher sales of durable goods such as clothing and footwear (5.1%).

Oh Woonseon, Director of Economic Trend Statistics at Statistics Korea, explained, "The simultaneous increase in industrial production, consumption, and investment is not merely a base effect from the deteriorated indicators in 2020 due to COVID-19, but rather reflects a strong economic recovery last year."

The problem is that the economic outlook for this year is not optimistic. The coincident index cyclical component, which indicates the current economy, rose by 0.7 points to 102.1, but the leading index cyclical component, which predicts future economic conditions, fell by 0.2 points to 101.2, continuing a decline for six consecutive months since July.

Hong Namki, Deputy Prime Minister and Minister of Economy and Finance, posted on his Facebook on the same day, "While concerns about domestic demand persist due to social distancing and the spread of Omicron, uncertainties continue externally with heightened geopolitical tensions such as Russia-Ukraine and accelerated monetary policy tightening in major countries." He emphasized, "We will closely monitor related trends and proactively manage domestic and external risks to ensure the rapid and strong recovery of our economy continues."

Meanwhile, the government held a meeting of related ministers (Green Room Meeting) chaired by Deputy Prime Minister Hong on the morning of the same day and formed an emergency response task force (TF) in response to the Ukraine crisis. The TF will conduct daily inspections by sector including supply chains, real economy, and macro-finance, share situations twice a week, and respond accordingly.