Semiconductor Production Down 4.4%, Transportation Equipment Down 17.8%
Cold Wave Drives Up Spending on Padding Jackets and Heat-Tech Clothing
Construction Performance Sees Largest Drop in 14 Years
Amid a sharp surge in semiconductor prices, manufacturers have begun to adjust shipment volumes, resulting in a decline in overall industrial production in January for the first time in three months. In contrast, retail sales continued to rise for the second consecutive month as consumers opened their wallets for padded jackets and other winter apparel during a cold snap, while facility investment rebounded after four months due to an increase in the introduction of machinery for semiconductor manufacturing.
According to the "January Industrial Activity Trends" released by the National Data Office on March 4, the overall industrial production index (seasonally adjusted) stood at 114.7 (2020=100) last month, down 1.3% from the previous month. This marks a reversal after two consecutive months of moderate growth in November (0.7%) and December (1.0%) of last year, ending the upward trend after three months.
The main factor was a 4.4% decrease in semiconductor production, including DRAM and system chips, which led to a decline in mining and manufacturing output. Although market demand remains strong due to the semiconductor supercycle, manufacturers appear to have adjusted their production pace following consecutive increases in semiconductor output in November (6.9%) and December (2.3%) last year. The delayed launch of Samsung Electronics' Galaxy S series, which is usually released in February but was postponed to March this year, also had an impact.
Lee Dowon, Director of Economic Trend Statistics at the National Data Office, explained, "The decrease in production compared to the previous month is due to the base effect from two consecutive months of increased semiconductor production," adding, "Production centered on high-specification products, such as high-bandwidth memory (HBM), remains solid." He further noted, "As semiconductor prices have surged, the export indicator from the Korea Customs Service, which is based on value, may appear larger, whereas the National Data Office's indicator is based on volume."
Production also declined in other transportation equipment, such as oil tankers, with a 17.8% decrease. Director Lee explained, "In December of last year, there was significant progress in production to deliver ships at the end of the year, but in January, manufacturers adjusted their process rates, leading to a reduction."
However, production increased in areas such as electronic components (up 6.5%). Service industry production, which reflects service consumption, remained flat at 0.0%.
Retail sales, which indicate household spending in January, rose 2.3% from the previous month, continuing the upward trend for the second month following a 0.6% increase in December last year. As January was the coldest in eight years, consumers spent considerably more on padded jackets and heat-tech clothing. Semi-durable goods, including clothing, increased by 6.0%. Due to KT's policy of waiving penalties as compensation for its hacking incident, consumption of durable goods such as telecommunications devices and computers also rose by 2.3%. Consumption of non-durable goods, including cosmetics, increased by 0.9%.
Facility investment, which measures the amount invested in capital goods supplied domestically, increased by 6.8% from the previous month. This marks a return to growth after four months since September last year (8.1%). Investment in transportation equipment rose by 15.1%. The early implementation of electric vehicle subsidy policies significantly boosted auto investment, which increased by 16.0%. Investment in machinery for semiconductor manufacturing also surged by 41.1%, resulting in a 4.0% increase in overall machinery investment.
On the other hand, construction completion (in real terms), which represents the actual output of civil engineering and building construction, decreased by 11.3% from the previous month. As of January, this is the largest decline in 14 years since a 13.6% drop in 2012. Director Lee commented, "Due to the unfavorable construction market, both non-residential and residential building performances have declined." Civil engineering construction maintained flat performance.
However, construction orders (current prices), which serve as a leading indicator of future construction activity, increased by 24.1% in buildings such as housing and by 70.5% in civil engineering projects such as railways and tracks, resulting in a 35.8% year-on-year increase. This is the largest increase in five months.
The cyclical variation index of the coincident composite index, which reflects current economic conditions, remained unchanged. The cyclical variation index of the leading composite index, which forecasts future economic trends, rose by 0.7 points from the previous month.
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