Korea’s production, consumption, investment rose in Feb. while chip output falls

[Photo by Yonhap]

South Korea reported increases in production, consumption and investment last month, achieving a triple rise for the first time in 14 months as easing in Covid policies encouraged more economic activities. Still, production of chips, the backbone of the Korean economy, worsened as demand remained weak.

The index of all industrial production, a comprehensive indicator of production activities in all sectors and after seasonal adjustment and excluding agricultural, forestry and fishery sectors, was 109.4 in February, up 0.3 percent from the previous month, according to the industrial activity trends released by Korea Statistics on Friday. The index has edged up 0.1 percent each in December last year and January this year and 0.3 percent in February after declining 1.1 percent in October and 0.5 percent in November last year.

Production in mining and manufacturing sectors, on the other hand, declined 3.2 percent as manufacturing production fell 3.1 percent and electricity and gas production dropped 8 percent.

Chip production, in particular, plunged 17.1 percent from the previous month and 41.8 percent from the same month last year. This month-on-month decline is the largest in 14 years and two months since an 18.1 percent decline in December 2008.

The manufacturing inventory ratio fell 0.7 percentage points from the previous month but was still high at 120.1 percent. The manufacturing production capacity index also fell 0.2 percent from the previous month, declining for a fifth consecutive month. It is the longest period of decline since statistics were first compiled in 1971.

Production in the service sector was up 0.7 percent, mainly led by transportation and warehouse up 5.4 percent and accommodation and food up 8 percent. Consumer-facing sectors performed well as outdoor activities increased on the favorable weather and slowing pandemic.

The retail sales index after seasonal adjustment, an indicator of consumption trends, also increased 5.3 percent to 108.4. Sales of non-durable goods such as food and beverages rose 6.4 percent, durable goods such as cars was up 4.6 percent and semi-durable goods such as clothes gained 3.5 percent. It has surged in February after declining for a third month from November last year to January this year. Statistics Korea says a number of factors including the base effect, large-scale discount promotions and subsidy resumption for electric vehicles played a part.

Facility investment was up 0.2 percent from the previous month on the back of growing machinery investment. The value of completed construction projects also rose 6 percent on the rise in construction and civil engineering performance.

Production, retail sales index and facility investment have increased together for the first time in 14 months since December 2021.

The cyclical component of the coincident composite index, which indicates the current economic status, was 99.4, up 0.4 point from the previous month. This is the first increase in six months since falling for five consecutive months from September last year. The cyclical component of the leading composite index, an indicator of future economy, on the other hand, stood at 98.5, down 0.3 point from the previous month. It has been declining or unchanged for eight straight months since July last year.

“Production, consumption and investment have increased and the cyclical component of the coincident index has managed to rise, but the big fall since the second half of last year seems to have had an impact,” said Kim Bo-gyung, deputy director general for economic trend statistics at Statistics Korea. “Uncertainty remains as the semiconductor sector, which largely determines the Korean economy, has no signs of recovery despite the latest positive factors including the rise in consumption.”