Korea’s factory output excluding chips falls 1.6% in June: Data

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South Korea’s factory output excluding the semiconductor sector has weakened by more than 1 percent in June, raising alarm bells on the country’s economy.

According to an analysis by Maeil Business Newspaper on Wednesday of industrial activity data from Statistics Korea, the country’s factory output gained 5 percent in the second quarter of 2024 from a year ago.

However, the growth fell to 1 percent when excluding semiconductors.

Chip production gained 22.4 percent in the second quarter from a year ago, boosting domestic production on its own.

Excluding semiconductors, factory output shrank for six straight quarters from the fourth quarter of 2022.

In June alone, factory output rose 3.9 percent but production excluding chips fell by 1.6 percent.

Semiconductor production surged by 26.9 percent in June but other industries struggled – chemical products gained 1.5 percent, primary metals shrank 9.8 percent, and automobiles fell 4.1 percent.

“The improvement in the semiconductor industry has led to an optical illusion that overall exports and production are improving,” said Joo Won, head of the Economic Research Department at Hyundai Research Institute. “The government needs to expand financial support for domestic companies and lower interest rates to prepare for economic shocks.”

Meanwhile, business sentiment in Korea also weakened for a second month.

According to data released by the Bank of Korea on Wednesday, the Composite Business Survey Index (CBSI) for all industries stood at 92.5 in August, down 2.6 points from the previous month.

This decline follows a reversal in July (95.1), which marked the first downturn in five months, and the downward trend continued for two consecutive months.

The CBSI is a measure of economic conditions, including production, business conditions, and financial circumstances, based on a survey of 3,524 corporations by the central bank.

A reading below 100 indicates that business sentiment is pessimistic about the economy.

“This reflects a complex set of factors, including concerns about a potential recession in the United States, delayed economic recovery in China, and the possibility of heightened geopolitical risks,” said Hwang Hee-jin, head of the BOK’s statistical survey team.