Korea records ‘triple minus’ in May as production, consumption, investment fall

[Photo by Yonhap]

South Korea’s production, consumption, and investment all fell simultaneously last month, marking the first ‘triple minus’ in 10 months. Despite robust export activity, domestic indicators such as service and construction sectors showed signs of weakness.

According to the industrial activity report released by Statistics Korea on Friday, the all-industry production index (seasonally adjusted, excluding agriculture, forestry, and fishing) stood at 113.1 in May, down 0.7 percent from the previous month. This index had previously declined by 2.3 percent in March, rebounded by 1.2 percent in April, only to fall again in May.

Breaking down the sectors, mining and manufacturing production decreased by 1.2 percent, with manufacturing output down by 1.1 percent. Key industries such as machinery equipment (-4.4 percent), automobiles (-3.1 percent), and primary metals (-4.6 percent) saw notable declines in production.

However, the semiconductor industry, a cornerstone of South Korea’s economy, showed positive signs. Semiconductor output increased by 1.8 percent, rebounding for the first time in three months. Improved exports led to a 32.8 percent year-on-year reduction in inventory, the largest decrease in 14 years and six months since November 2009, contributing to an 8.4 percent reduction in overall manufacturing inventory compared to a year ago.

Service sector production fell by 0.5 percent, with increases in retail (1.9 percent) and arts, sports, and leisure (5.1 percent) offset by declines in finance and insurance (-2.5 percent), information and communications (-1.6 percent), and accommodation and food services (-1.7 percent).

Retail sales fell by 0.2 percent, marking the second consecutive month of decline, a pattern not seen since March-April of last year. Sales of semi-durable goods such as clothing dropped by 2.9 percent, while sales of non-durable goods like food and beverages (0.7 percent) and durable goods like passenger cars (0.1 percent) saw slight increases.

The simultaneous declines in service sector production and retail sales were last observed in April of the previous year.

Facility investment decreased by 4.1 percent, continuing a three-month decline, with reductions in transportation equipment (-12 percent) and machinery (-1.0 percent).

The combined decline in all-industry production, retail sales, and facility investment is the first such occurrence since July of last year. Construction performance, measured in constant terms, dropped by 4.6 percent due to declines in both building construction (-5.7 percent) and civil engineering (-1.1 percent).

Construction orders (current terms), a bellwether for future construction activity, were down 35.4 percent from a year earlier in both civil engineering (-45.0 percent) and building construction (-28.9 percent) from a year earlier.

The cyclical component of the coincident index, which reflects current economic conditions, fell by 0.6 points to 98.8, the largest decline in 48 months since the onset of the Covid-19 pandemic in May 2020. Similarly, the cyclical component of the leading index, which predicts future economic conditions, also fell by 0.1 percentage points to 100.5.