[Weekly Outlook] Focus on Industrial Activity Trends and Announcement on Q3 Electricity Rate Increase

Bank of Korea's 'June Consumer Sentiment Survey'
Statistics Korea Releases 'May Industrial Activity Trends'

On the 16th, amid rising prices caused by the COVID-19 pandemic, the Russia-Ukraine war, China's lockdown measures, the U.S. interest rate hikes, and soaring international oil prices, a merchant is waiting for customers at a traditional market in downtown Seoul. Photo by Moon Honam munonam@

[Asia Economy Sejong=Reporter Dongwoo Lee] This week (June 27?July 1), trends in domestic production, consumption, and investment from last month will be disclosed. The decision on whether to raise the fuel cost adjustment unit price for electricity rates in the third quarter of this year is also expected to be made this week.

According to related ministries on the 26th, Statistics Korea will announce the May industrial activity trends on the 30th. Attention is focused on whether the significantly increased downside risks to the economy are materializing amid consumer price inflation exceeding 5% due to the Ukraine crisis.

In April, production, consumption, and investment recorded a 'triple decline' for the first time in 2 years and 2 months since the outbreak of COVID-19. In the recently published June issue of the Economic Trends (Green Book), the government diagnosed that "amid continued high inflation due to worsening external conditions, concerns about economic slowdown such as sluggish investment and weakening export growth are rising." This is the first time the government has expressed concerns about economic slowdown during the recovery process of the Korean economy after COVID-19.

On the same day, the Ministry of Economy and Finance will announce the status of national tax revenue for May. National tax revenue from January to April this year amounted to 167.9 trillion won, an increase of 34.5 trillion won compared to the same period last year. The biggest impact came from corporate tax (51.4 trillion won) increasing by 21.4 trillion won, thanks to strong corporate earnings last year.

The Bank of Korea will release the results of the 'June Consumer Sentiment Survey' on the 29th. In the May survey, the expected inflation rate, which is the consumer-anticipated consumer price inflation rate for the next year, rose by 0.2 percentage points (p) to 3.3%, reaching the highest level in 9 years and 7 months. If expectations of further price increases grow, economic agents may actually push prices higher through prices and wages, so attention is on whether the upward trend in expected inflation has calmed down.

On the 30th, the results of the 'June Business Survey Index (BSI)' will also be announced. In May, the BSI for all industries (86) remained the same as in April, but looking at manufacturing alone, the BSI (86) fell by 1 point in one month. Due to the lockdowns in major Chinese cities and rising raw material prices, there is interest in whether the perceived business conditions in manufacturing worsened in June as well.

The fuel cost adjustment unit price for electricity rates in the third quarter of this year is also expected to be decided this week. The Ministry of Trade, Industry and Energy announced on the 24th that "the adjustment plan for electricity rates in the third quarter will be announced next week." Korea Electric Power Corporation (KEPCO) previously requested an increase in electricity rates by submitting the calculation details of the third quarter fuel cost adjustment unit price to the Ministry of Trade, Industry and Energy and the Ministry of Economy and Finance on the 16th. KEPCO, which recorded a deficit of 7.8 trillion won in the first quarter of this year, insists that an increase in electricity rates is necessary to resolve the deficit.