May Production, Consumption, and Investment All Decrease for the First Time in 10 Months (Comprehensive)

May Industrial Activity Trends Semiconductor Up 1.8%
Retail Sales Down 0.2% for 2 Consecutive Months
Facility Investment Down 4.1% for 3 Consecutive Months

Last month, production, consumption, and investment all declined simultaneously compared to the previous month. This marks the first time in 10 months since July last year that all three major indicators recorded negative figures. Semiconductor exports showed signs of recovery, but investment and consumption remained relatively sluggish.

According to the 'May Industrial Activity Trends' released by Statistics Korea on the 28th, total industrial production (seasonally adjusted, excluding agriculture, forestry, and fisheries) decreased by 0.7% 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%), rebounded in April (1.2%), but turned negative again after just one month.

Breaking down industrial production by sector, mining and manufacturing decreased by 1.2%. Manufacturing, which accounts for a large portion of mining and manufacturing, declined by 1.1%. Semiconductor production rebounded by 1.8% for the first time in three months since February, but other industries such as automobiles (-3.1%) showed a decrease in production, indicating an overall adjustment trend. Machinery and equipment production also fell by 4.4%. Service sector production decreased by 0.5%.

Gong Mi-sook, Director of Economic Trend Statistics at Statistics Korea, analyzed, “(Although production turned negative) overall production is showing a decent trend,” adding, “Manufacturing is influenced by strong semiconductor exports.” In fact, semiconductor exports are proceeding smoothly, significantly reducing inventory. Compared to the same month last year, semiconductor inventory decreased by 32.8%.

Consumption indicators recorded negative figures for two consecutive months. Retail sales, which reflect goods consumption, decreased by 0.2% compared to the previous month, marking a two-month decline. Sales of durable goods such as passenger cars (0.1%) and non-durable goods such as food and beverages (0.7%) increased, but sales of semi-durable goods decreased by 2.9% due to a decline in clothing sales, as the early heatwave accelerated the timing of summer clothing purchases. Director Gong explained, “Consumption this year does not appear to be better than last year,” adding, “There are fluctuations in goods consumption, but overall, the situation does not seem favorable.”

Facility investment decreased by 4.1% compared to the previous month, marking the third consecutive month of decline. Investment fell in transportation equipment such as aircraft and ships (-12.3%) and machinery such as precision instruments (-1.0%). The delay in the introduction of large aircraft and semiconductor machinery in May affected this. Construction output decreased by 4.6% compared to the previous month, with declines in both building (-5.7%) and civil engineering (-1.1%). In buildings, construction output was weak in non-residential sectors, and in general civil engineering, construction output was sluggish in projects such as highways.

The coincident index of economic indicators, which reflects the current economy, fell by 0.6 points from the previous month to 98.8. The leading index of economic indicators, which forecasts future economic conditions, also dropped by 0.1 points to 100.5.

The Ministry of Economy and Finance assessed this as a temporary adjustment within the scope of monthly volatility. The ministry stated, “Overall, major indicators are considered to have undergone adjustments following the improvement last month (+1.2%) within the context of monthly volatility,” and added, “Total industrial production remains stable, and the robust export momentum centered on exports and manufacturing continues to support the economic recovery trend.”

A ministry official said, “There were department store sales events in June, and preliminary indicators such as automobile sales are also not bad,” adding, “Considering the temporary delay in the introduction of medium and large aircraft, it is expected that the economy will not deviate from the anticipated improvement path.”