Korea’s industry production, consumption, investment up in May

South Korea’s industry production, consumption and investment, which are three measures of industrial activity, rose last month for the first time since February. However, the gains are not strong enough to suggest a full recovery of the economy.

According to the industrial activity trend released by Statistics Korea on Friday, the May index of all industry production (IAIP) after seasonal adjustment and excluding agriculture, forestry and fishing stood at 111.1 against the baseline of 2020, up 1.3 percent from the previous month. It is the largest increase in 14 months since March last year.

After gaining 1.1 percent each in February and March, industrial production fell 1.3 percent in April and turned back positive in a month.

Mining production rose 3.2 percent. The increase in overall production was led by manufacturing output, which was up 3.2 percent.

The inventory rate fell 6.8 percentage points to 123.3 percent in May from 130.1 percent in April. The decline was driven by a drop in automotive and machinery equipment inventories although semiconductor inventories were up 2.7 percent.

Still, the growth in semiconductor inventories slowed significantly from 30 percent in the previous month. Semiconductor shipments increased by 19 percent.

“The inventory ratio itself declined as semiconductor shipments increased sharply,” said Kim Bo-kyung, deputy director general for short-term economic statistics at Statistics Korea. “There are no signs of a significant increase in semiconductor exports, and it is still hard to say that there are strong signs of a rebound.”

Service sector production edged down 0.1 percent from the previous month.

Accommodation and food services, meanwhile, saw a 4.5 percent decline. Some analysts attribute the decline to bad weather during May holidays and increased trips abroad.

The retail sales index (RSI) after seasonal adjustment, a measure of spending trends, in May was 105.2 against 100 in 2020, up 0.4 percent from April. The semiconductor sector is not showing clear signs of a rebound yet. Chip production had declined for the first two months this year but jumped 30.9 percent in March. It has continued to edge up since in April by 4.9 percent and 4.4 percent in May. Yet, it is still down 16.7 percent year-on-year.

Consumption of durable goods including home appliances and furniture rose 0.5 percent, semi-durable goods including shoes, bags, and clothing 0.6 percent, and nondurable goods such as food and drugs 0.2 percent.

Facility investment gained 3.5 percent from the previous month, led by greater investment in machinery and aircraft transportation equipment.

The value of construction completed was up 0.5 percent month-over-month as construction and building gained 0.7 percent while civil engineering shed 0.1 percent.

The cyclical component of coincident composite index, a measure of current economic conditions, rose 0.1 points to 99.9, continuing the upward trend for the fourth straight month. The leading component of coincident composite index, which had fallen for six consecutive months, remained unchanged from the previous month.

“Uncertainties remain high according to the timing and extent of the rebound in the information technology sector and economic trends in major advanced economies,” Kim said.