April Industrial Production Rises 1.1%... Consumption and Investment Remain Weak (Comprehensive)

Statistics Korea April Industrial Activity Trends
Automobile Production Up 8.1%
Semiconductor Production Down 4.4%

Last month, industrial production turned positive after a month, but consumption and investment indicators both declined. By sector, automobile production increased significantly, while semiconductor production decreased for the second consecutive month.

According to the 'April Industrial Activity Trends' released by Statistics Korea on the 31st, total industrial production last month increased by 1.1% compared to the previous month. The growth trend that had continued for four consecutive months since November last year was interrupted in March (-2.3%) but turned positive again after one month.

Looking at industrial production by sector, production increased compared to the previous month in manufacturing and mining and manufacturing industries (2.2%), as well as in the service sector (0.3%). Notable increases were seen in automobile (8.1%) and chemical product (6.4%) production. In particular, automobile production rose by the largest margin in 15 months since January 2023 (8.3%). Mi-sook Gong, Economic Trend Statistics Officer at Statistics Korea, said, “Automobile exports to North America are doing well, so overall business conditions appear to be favorable.”

However, semiconductor production decreased by -4.4%, continuing a negative trend for the second month. Nonetheless, compared to a year ago, it increased by 22.3%. Officer Gong explained, “The semiconductor sector seems to be experiencing a base effect from the previous growth trend,” adding, “Since the business conditions themselves are good, we need to observe whether it has entered a correction phase.”

The Ministry of Economy and Finance stated, “Despite the semiconductor adjustment, production increased in 22 out of 28 major industries, marking the first positive start to a quarter in five quarters,” and added, “Exports in May are also expected to increase significantly, indicating that the robust improvement in manufacturing and exports continues in the second quarter, driving economic recovery.” Manufacturing inventories increased by 0.9% compared to the previous month, and the average operating rate rose by 2.1 percentage points to 73.5%.

Consumption indicators turned negative after a month. Retail sales, which reflect goods consumption, decreased by 1.2% compared to the previous month. Sales increased in non-durable goods such as cosmetics (0.4%) and semi-durable goods such as clothing (0.5%), but sales declined in durable goods such as passenger cars (-5.8%). Officer Gong analyzed, “Overall, production is progressing well, but consumption is not keeping pace,” and added, “The recovery speed appears to differ by sector.” The Ministry of Economy and Finance said, “In domestic demand, goods consumption shows some adjustment after rising the previous month, while service consumption continues a gradual improvement.”

Facility investment increased by 0.3% in transportation equipment such as automobiles but decreased by 0.4% in machinery such as special industrial machines, resulting in a 0.2% decline compared to the previous month. Construction performance increased by 5.0% compared to the previous month, with both building (6.1%) and civil engineering (1.7%) construction showing growth. Domestic machinery orders increased in the private sector (3.4%) but decreased in the public sector (-67.1%), while construction orders (current) increased in both building such as housing (34.4%) and civil engineering such as machinery installation (63.8%).

The coincident index and leading index diverged. The coincident index, which reflects the current economy, fell by 0.2 points to 99.4 compared to the previous month. The leading index, which forecasts future economic conditions, rose by 0.1 points to 100.5 compared to the previous month. The Ministry of Economy and Finance stated, “April industrial activity suggests a good start to the second quarter, indicating a continued economic recovery trend,” and added, “Domestic demand shows some adjustment in goods consumption, but the gradual improvement in service consumption and the rebound in construction performance indicate a sustained recovery.”