Korea’s industrial production dips for third straight month in July

Courtesy of Yonhap News

South Korea’s industrial production declined for the third consecutive month due to sluggish domestic demand and retail sales.

According to data released by Statistics Korea on Friday, the seasonally adjusted all-industry production index—excluding agriculture, forestry, and fisheries— stood at 112.7 in July, based on a 2020 reference point of 100.

This figure represents a 0.4 percent decrease from the previous month.

Industrial production has been on a steady decline since April’s 1.4 percent increase, falling by 0.8 percent in May, 0.1 percent in June, and 0.4 percent in July.

This marks the longest stretch of consecutive declines since the period from August to October 2022.

The mining and manufacturing sectors were hit particularly hard, with production dropping 3.6 percent from June in July, the steepest decline in 19 months since December 2022’s 3.7 percent fall.

Manufacturing, a key component of these sectors, saw a 3.8 percent fall, driven by contractions in both the semiconductor and automobile industries.

Automobile production plummeted by 14.4 percent, the sharpest drop in 50 months since May 2020. Semiconductor production also fell by 8 percent, which Statistics Korea attributes to a base effect following strong performance in June, despite continued strength in the AI and IT sectors.

In contrast, the service sector saw a modest increase of 0.7 percent in July.

Although there were declines in finance and insurance (-1.3 percent), accommodation and food services (-2.8 percent), and arts, sports, and leisure (-1.3 percent), gains in information and communications (4.5 percent) and transportation and storage (3.1 percent) offset these losses.

Public administration production also rose by 6.0 percent.

Retail sales dropped by 1.9 percent in July. This decline followed a brief recovery in June, where sales had increased by 1 percent after decreases of 0.6 percent in April and 0.2 percent in May, reflecting the erratic nature of consumer spending.

On the other hand, facility investment surged by 10.1 percent in July, marking the second straight month of growth. The increase was largely driven by a 50.5 percent jump in transportation equipment investment. Meanwhile, construction completions fell by 1.7 percent, as gains in building construction (0.9 percent) were overshadowed by a sharp decline in civil engineering (-8.9 percent).

Looking ahead, construction orders—a key indicator of future activity—rose by 28.4 percent year-over-year, fueled by an 83.5 percent surge in civil engineering orders.

The coincident index, which measures current economic conditions, dropped by 0.6 points to 98.4, continuing its five-month slide.

The leading index, which predicts future economic activity, remained steady at 100.6, unchanged from the previous month.